For the remainder of the year, the National Food Authority (NFA) still has more than P10 billion budget to buy as much as 10 million bags of locally produced unhusked rice, a top official of the state-run grains agency said.
In a text exchange, NFA Administrator Judy Dansal said NFA is still set to buy 10 million bags of palay from rice farmers for the remaining part of 2020. If this isn’t enough, she said, the agency could still buy more since it has “credit lines available.”
“For this year, we have P7 billion from subsidy, P5.5 billion from corporate receipts that include our sales of rice, and P2.5 billion from cash and credit lines. So far, we already used P3 billion for procurement,” Dansal said on Monday.
“Yes [we can buy more palay because] we have credit lines available and the DOF [Department of Finance] supports us,” she added.
She said this amid calls by some groups for the Philippine government to buy more palay from farmers so they wouldn’t be forced to sell their produce at current farmgate price of about P11 per kilogram (/kg) to P12/kg.
In the Philippines, the cost to produce rice is about P12/kg, while NFA, whose sole mandate has been reduced to buffer stocking for calamities and emergencies after the passage of Rice Tariffication Law, buys palay at P19/kg.
Every year, NFA gets an annual budget of P7 billion to procure palay, which it sells to local government units (LGUs) and other government agencies like Department of Social Welfare and Development (DSWD) to support their relief efforts.
Dansal told Business Bulletin that while NFA could increase the amount of palay it could buy for this year, the agency couldn’t buy it all because some farmers would still choose to sell to traders.
“We don’t buy everything. The private traders of course will also buy because they have clients requiring local rice too,” she said.
At present, NFA procures 33,775 bags of palay per day nationwide in different provinces.
In August, Dansal said it is not the supply, but the lack of rice milling facilities and low buying price that impedes the agency’s palay procurement.
According to her, NFA’s rice milling warehouse could only cater to 25 percent of its palay inventory, forcing the agency to keep its contract with private millers, while farmers sometimes opt to sell their produce to traders when the farm-gate price of palay is higher than the government buying price.
“The market dictates the price. So if the farm-gate price of palay is high, higher than the P19/kg buying price of the government, the farmers sell their produce to the private traders,” she said.
Also on Monday, the Federation of Free Farmers (FFF) pointed to the unabated entry and unpredictable pattern of rice imports as the main cause for the current drop in palay farmgate prices.
Data from the Philippine Statistics Authority (PSA) showed that palay prices have been on a downward trend, averaging P18.39/kg in late August, down about 5 percent from their peak in May 2020.
Field reports, on the other hand, showed that buying prices, as of September, have already gone down to as low as P16/kg on a dry basis and to P11/kg to P13/kg for wet or freshly harvested palay.
The FFF noted that the decline in farmgate prices is surprising considering that imports from January to August 2020 totaled only 1.66 million tons, or about 25 percent lower than in the same period last year.
In turn, national rice inventories as of August 1 were about 16 percent lower than in the previous year, which should also help push the price of palay higher.
FFF National Manager Raul Montemayor attributed the declining prices to speculative behavior of traders arising from the lack of a clear rice import policy from the DA.
“Many traders are playing safe and buying low because they fear that imports will continue to come in and flood the market again in the coming months. Last year, they bought palay from farmers during the first half of the year at relatively high prices and were caught flatfooted by the massive inflow of imports in the second half of the year. Many of them could not unload their stocks at a profit and some had to suspend their operations,” he said.
Normally, palay buying prices really go up in September because of the scarce supply of palay and then go down only during the peak harvest season in October and November.