Palay prices dip below production cost, many farmers no longer make money

Palay prices in some parts of the country have dipped below the production cost, but the worst is yet to come for rice farmers.

Based on the initial survey by Federation of Free Farmers (FFF), palay prices in some parts of the country, including Pangasinan, Tarlac, Mindoro Occidental, Negros Occidental, Zamboanga Sibugay, Davao del Norte and South Cotabato, have already gone down to P12 per kilogram (/kg) to P15/kg.

In Sultan Kudarat, palay prices have been observed to be around P14/kg to P15/kg based on the survey of FFF charters.


Data from the Philippine Statistics Authority (PSA) also showed that despite low rice inventory across the country, farmgate prices of palay from January to June still fell year-on-year from P17.42/kg to P16.94/kg. The monthly average farmgate price of palay for January to June 2021 ranged from P16.40/kg to P17.22/kg.

The last time PSA published a detailed weekly update on palay farmgate prices was in January of this year.

In a text exchange, FFF Board Chairman Leonardo Montemayor said he fears that palay prices will drop further once the bulk of the harvest comes in October to November, which will further hurt rice farmers.

In the Philippines, the cost of producing palay stands at P12.41/kg. This is way higher than the production cost for rice in Vietnam, which is around P6.22/kg, and in Thailand, which is around P8.86/kg.

The government is now targeting to lower the cost of rice production using the Rice Competitiveness Enhancement Fund (RCEF), which is the tariff collected from imported rice.

Philippine Center for Postharvest Development and Mechanization (PHilMech) Director for Applied Communications Division Aldrin Badua earlier said that with the government’s mechanization efforts, the production cost of palay will go down by more than 20 percent to P9/kg by the end of 2024.

Unfortunately, Montemayor thinks the government is not acting fast enough. "The government must now deploy or make available mechanical dryers," Montemayor told Business Bulletin.

"In fact, farmers are being squeezed by hefty oil and fertilizer prices and by low palay prices caused by ongoing importation and the start of main harvest."

"NFA and LGUs should prioritize palay deliveries by farmers' cooperatives and organizations. Restrict rice importations while harvest is ongoing," he added.

Last week, it was reported that the Philippines’ rice inventory fell in August after stocks in households, commercial, and NFA warehouses all recorded decline in supply. Another PSA data showed that as of August, the country's rice stocks inventory was recorded at 1.59 million metric tons (MT), indicating a reduction of 11 percent from its level of 1.79 million MT in the same period last year.

The August inventory was also the lowest volume since the 1.168 million MT recorded in September 2018.

The Kilusang Magbubukid ng Pilipinas (KMP) said this data showing three-year low rice inventory for the Philippines, which also exposes the country's declining rice self-sufficiency, is alarming.

This, according to KMP, must prompt the Department of Agriculture (DA) to focus its efforts on reviving the local rice industry impacted by the Rice Tariffication Law, the law that allowed unlimited rice importation in the country.

On Tuesday, Agriculture Secretary William Dar urged LGUs, particularly those in top rice-producing provinces, to help the government buy palay directly from farmers to prop up prices this main cropping season.

“It is that time of the year again, wherein we are counting on the continued support of LGUs, including multi-purpose farmers' cooperatives and associations (FCAs), as they have done since 2019, to help the Department of Agriculture through the NFA to buy from their farmer-constituents and thus stabilize prices in their respective areas,” said Dar.

"We hope to institutionalize our partnership with the LGUs and FCAs, as it offers a win-win situation for farmers, not only during harvest of rice, but also of corn and other crops, providing them an assured market and reasonable price for their produce," he added.

Every year, NFA only receives palay procurement fund worth P7 billion, enough to buy 300,000 metric tons (MT) of palay at a maximum price of P19/kg.

For the second semester of the year, DA expects palay harvest to reach more than 11 million MT, barring strong typhoons. This would bring the projected total annual production to more than 20 million MT, topping last year's record yield of 19.4 million MT.