OF SUBSTANCE AND SPIRIT

Yesterday, the broadsheets reported the order of the President to use all available legal tools “to control the prices of rice and ensure that the staple is readily available to the poor” following a sectoral meeting at the Malacañang. Radio Television Malacañang (RTVM) carried his concern that despite the sufficiency of rice in the Philippines, elevated rice prices continue to elude the capacity of our people to buy. 

Are we legislating against the dynamics of supply and demand? 

Just about 10 days ago, the President himself had assured the public that the price of rice would stabilize soon, as harvest starts in key palay-producing regions in the Philippines. These include Nueva Ecija, Isabela and North Cotobato. Obviously, this utmost confidence is premised on the abundance of supply and sufficiency of reserves. 

Thus, the President said: “The rice situation is manageable and stable. There is enough rice for the Philippines up to and after the El Niño next year.”

The President’s confidence must be based on what Department of Agriculture (DA) Undersecretary for Rice Industry Development Leo Sebastian said that some 900,000 metric tons (MT) of rice have been reaped in those three key areas for rice production. As a matter of cycle, palay yield is supposed to peak in late September to October bringing the second half’s rice production to escalate. For this year, this is estimated at over 11 million MT. Complementing this assurance, another DA undersecretary, Merceditas Sombillo, formerly of NEDA and in charge of policy, planning and regulations, advised that at the minimum, the projected ending inventory for this year is 1.96 million MT. This is very critical because, if correct and barring any downside risks, such a level should suffice to cover our rice requirements for 52 days.

In fact, USec Sombillo admitted that if the estimate is based on the stock projection of the Philippine Statistics Authority, we should have a more optimistic scenario with an ending stock of 2.12 million MT, good for 57 days.

But make no mistake, the Philippines produces rice for its over 100 million population. However, rice technology has not caught up and relevant agricultural infrastructure remains weak. Public policy continues to be sub-par. As a result, we have this perennial problem of inadequate supply and rising rice prices. Despite the objections of some conflicted parties in the past, we have succeeded in liberalizing rice imports through tariffication so that timely importation of rice could address this challenge that has assumed political proportion. 

And at this time, it would also be appropriate to consider what former DA USec Fermin Adriano once proposed. Tweak tariffs, even temporarily, on rice imports in as much as previous rounds of rice importation have brought in some significant tariff duties for modernizing agriculture, doing research on disease and weather-resistant rice varieties and strengthening post-harvest facilities.

It should dawn on the advisers of the President that his latest pronouncement puts him in a most embarrassing situation. If all it takes is to deploy legal tools by intensifying warehouse inspection, then it means that the Bureau of Customs is amiss in doing its job. Based on the reported warehouse inspection in Bulacan, about half a billion pesos worth of smuggled rice from Vietnam, Cambodia and Thailand was found. The Customs chief in fact claimed that under his leadership, some ₱30 billion worth of contraband items have been confiscated. This is not a small amount. Even backtracking investigation could only show that the government needs to do more in law enforcement. What was done by the government in dealing with derogatory information? Was this just to populate its database? 

No doubt, illegal smuggling and hoarders of basic commodities are no less than economic sabotage. No legal tools should have been spared to deal with them, crisis time or peace time. As it is, if we are to pursue the logic of this latest pronouncement, rice prices are shooting up because of hoarding and illegal smuggling. This latest pronouncement means the failure of law enforcement is behind what we are experiencing today. 

Unfortunately, we are effectively glossing over the fact that we are producing less than our aggregate demand for rice. That makes rice imports unavoidable. But as a matter of public policy, the Philippine government should keep its eye on the ball. Its annual budget should allocate more to mitigate the undeniable high cost of inputs — fertilizers, pesticides, high-yielding and climate/disease resistant varieties and farm mechanization. Despite all the previous attempts to modernize agriculture, we continue to struggle with poor post-harvest facilities like farm-to-market roads, drying and storage facilities that actually reduce farm productivity and actual production. Aging farmers’ demographics is also something we need to address. Climate change and market forces do not seem to have figured in the rice equation. 

For instance, this year’s rice imports have been lower compared to year-ago’s level by nearly 43 percent. From January to August this year, we have imported around 189 million MT due to higher international rice prices. This is an expected outcome due to the rice export ban of some rice-exporting countries like India and Vietnam. Vietnam supplies around 90 percent of our annual rice imports. This issue will not contribute to lower rice prices.

We all want to be encouraged by the recent initiatives of the government. But we hear dissonant voices from the same quarters. For instance, DA just two days ago announced that it could not commit that the onion crisis we went through last year would not recur for rice. In a congressional hearing, DA officials could only commit to rice prices moderating, not to ₱20 per kilo, but to ₱45-₱50 for premium rice and to ₱36-₱44 for regular-milled rice. Our housewives should be able to testify that overall rice prices continue to be volatile with an upward bias.

It should not surprise us, therefore, that in the Nomura Food Vulnerability Index (NFVI), the Philippines emerged as the most vulnerable from rising food and energy prices among countries in emerging Asia. Out of 110 countries in the world, we ranked 17th which is the highest among larger emerging countries, shocked by a 20 percent increase in food and energy prices. Given that 34.8 percent of our consumer basket consists of food, especially rice at 8.9 percent and most of our oil needs are imported, a larger pass-through to inflation should be expected.

The BSP’s hawkish stance should therefore remind us to be more careful in appreciating policy pronouncements and going beyond the recent trends in headline inflation numbers. 

Look at the risks, risks and risks…