The Market Monitor Minding the Nation's Business
By Riza Lozada
The government’s policy of self-sufficiency in rice has, since the previous administration, led to the unintended consequence of raising the price of the cereal, according to a recent study on food security released by state think tank Philippines Institute for Development Study (PIDS) said.
Roehlano Briones, a senior research fellow of PIDS, said the policy, which is being “implemented in the name of food security, pushed up the price of rice to the detriment of the poor.”
Two strategies are usually associated with achieving food self-sufficiency: support for domestic production and maintaining protectionist barriers that “shield local producers from foreign competition.”
Between the two, Briones pointed out that the barriers to imports are responsible for triggering price increases.
“A ban would lead to shortages,” explained Briones, forcing the responsibility of supply solely on the domestic industry.
As the cycle goes, a ban leads to shortages and causes prices to soar, but also, as Briones pointed out, “stimulating domestic production, stifling off some of the demand, while stimulating more production.”
Ideally, shortages are eventually eliminated and self-sufficiency is eventually attained but at a higher price paid by the consumers, said Briones.
There are real consequences to rising prices in basic commodities like rice. As in many things, the poorest and the most vulnerable are the hardest hit.
“Statistical analysis relating regional stunting rates to regional per-capita incomes and food prices finds that, as the price of rice increases, the rate of childhood stunting increases,” said Briones. “High prices cause more malnutrition,” he added.
Down the line, malnutrition is only going to develop into long-term adverse consequences of poor cognition and educational performance, low adult wages, and low productivity.
“The Philippines government did the right thing in pursuing production support for rice. It shifted support away from ineffective and wasteful fertilizer and seed subsidy programs,” Briones said.
The complementary increase in budget for production support helped. Overall, Briones said the interventions were “on the right track” to promote food security by enhancing domestic production capacities. But what the government needs to revisit now are the failures and the rise in prices caused by maintaining restrictive policies.
Briones recommended repealing Republic Act 8178, which exempts rice from tariff, repealing the National Food Authority’s (NFA) import monopoly, and opening rice importation to the private sector. He also underlined the important role of the Executive in defining an informed tariff policy.
The NFA, meanwhile, said it would intensify its local palay procurement to reach its target volume.
“The NFA’s target for palay procurement this year is 4,607,350 bags or 230,367 metric tons (MTs) to boost the government’s buffer stock and rice distribution requirements,” said NFA Administrator Jason Laureano Aquino in a statement.
Aquino already ordered NFA field offices to step up their buying operations, as the summer crop harvest starts this month until June.
The NFA’s buying price for clean and dry palay is P17 per kilogram.
Incentives are also being offered to individual farmers and farmer cooperatives nationwide, including delivery, drying and Cooperative Development Incentive fee or a total of P17.70 to P18 per kilogram.
The NFA aims to procure 79,240 MTs of palay from January to June this year.
As of Feb. 22, the food agency has already bought a total of 47,782 bags of palay nationwide based on the data released by the NFA’s Grains Marketing Operation Department.
The bulk of this year’s target volume is expected to be bought during the main harvest from October to December.
At least 413 buying stations nationwide are being used so farmers could sell their produce to the agency.
Mobile procurement teams are also ready to be deployed to far-flung areas where farmers may find it hard to transport their produce to NFA buying stations.