Rice retail prices down by 8 pesos, targeted support programs for rice farmers deployed

Photo DA

Finance Secretary Dominguez III reiterated the Duterte administration’s unwavering commitment to the twin goals of helping the country’s rice farmers become more globally competitive and providing Filipino families with access to affordable rice.


During the Philippine session of the 11thWorld Rice Congress held in Manila earlier this week, Dominguez said “Filipino farmers can be as productive as those in Vietnam and Thailand if provided with the right kind of support. The revenues raised from rice tariffs will help us mechanize production, provide cheaper financing and better training to our farmers, and encourage a more diversified farm sector.” 


“Eight months since rice trading was liberalized through enactment of the Rice Tariffication Law (RTL), the price of rice has come down by a national average of more than P8 per kilo for more than a hundred million Filipinos. This is particularly helpful for low income households that spend around a fifth of their budgets on rice alone,” he added. This price reduction is well within the economic team’s estimate of a 7- to 10-peso drop in retail prices that was reported to Congress and the public last year. 


As Filipino consumers have begun enjoying the benefits of the new rice trading regime, the government is implementing measures to address short-term transition challenges—specifically the drop in palay prices in specific areas.


According to official data provided by the Philippine Statistics Authority (PSA), from an average of P17.23 per kilo of dry palay from 2015 to 2017, when prices were normal, prices declined to an average of P15.71 per kilo from the third week of September to the second week of October of this year. This translates to an average loss for farmers of about P1.52 per kilo.


Citing PSA data, Dominguez reported that “In some provinces, farmgate prices fell by as much as P5.63 per kilo while in others, palay prices actually rose by P3.75 per kilo.”


“The government is constantly monitoring location-specific prices so that interventions are designed and deployed on an evidence-based and targeted manner”, he added.


The measures include both expanded assistance to farmers and intensified enforcement of regulations against abusive trading practices.”


According to the report of the Department of Agriculture (DA) in the October 23, 2019 meeting of the Economic Development Cluster – of which Dominguez is chair – the DA and its attached agencies, agriculture-focused financial institutions, and local governments have implemented urgent measures to support farmers and will continue to do so in the coming months. 


These measures include the Survival and Recovery (SURE) aid, an interest-free loan payable for up to eight years; procurement of local rice for distribution as a rice subsidy for the poor; and the Palay Alay sa Magsasakaand BUYanihan programs which are loans for local governments to procure palayfrom rice farmers this harvest season.


Support programs also include the provision of loan assistance and productivity enhancement for local rice farmers under the Rice Competitiveness Enhancement Fund (RCEF) and the National Rice Program (NRP). The RCEF funds the distribution of machines and high-quality seeds, cheaper financing, and better training for our farmers.


Tariff revenues in excess of the annual P10 billion earmarked for the RCEF will go to additional interventions, such as unconditional cash transfers for farmers in affected areas.


Provinces with the biggest drop in dry palay price per kilo relative to the normal period are Bulacan (P5.63), Compostela Valley (P5.20), Pampanga (P4.60), Ilocos Norte (P4.38), and Agusan del Norte (P4.37).[1]


The Department of Finance (DOF) is also closely monitoring potential distortions in the market, particularly the price gap between farmgate and retail prices. The gap between the per kilo retail price of regular milled rice and farmgate price of dry palay s widest in the provinces of Iloilo (P29.75), Zamboanga del Norte (P28.50), Negros Occidental (P28.01), Kalinga (P25.33), and Bulacan (P25.25).[2] The average gap is around P22, as average retail price is P37.51 per kilo compared to dry palay f armgate average price of P15.71 per kilo. 


Finance Undersecretary Karl Kendrick Chua, who heads the DOF’s Strategy, Economics and Results Group (SERG), said the wide discrepancy between the farmgate price and the retail price of regular milled rice in some regions starting in October indicate a problem in the “middle supply chain,” referring to traders who have kept their imported rice stocks in warehouses to drive retail prices up despite abundant supply.


“The palay price is still falling but the retail price is not falling as fast so there's a growing disconnect,” Chua said during a recent DOF Executive Committee (Execom) meeting, citing data from the PSA.  


The government is closely monitoring possible distortions in the market, particularly the widening gap between farm gate prices for paddy and rice retail prices in specific provinces. Both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) have formed strike teams to look into possible smuggling and hoarding activities, and non-compliance with tax and business regulations.


Last October 3, 2019, the DOF and BIR raided unregistered warehouses in Bulacan and discovered more than 250,000 sacks of imported rice from Vietnam and Myanmar, among other commodities. To date, the companies involved have not produced import documents. 


During the Execom meeting, DOF Assistant Secretary and Spokesperson Antonio Lambino II said the Department has received reports that some traders reserve warehouse space without storing anything in them, “so that they can put pressure on the farmers to sell at very low prices because the farmers now don't have anywhere to put their harvest.”


The anti-smuggling and anti-hoarding activities are expected to intensify as the DA and the Philippine Competition Commission (PCC) jointly investigate possible collusion in the domestic rice market, alongside enforcement of tax and customs regulations by the DOF, BIR, and BOC.