We need sober views on rice price issue

We need to put the rice price issue in proper perspective: Commercial rice price is within norm if it does not exceed double the palay price of last harvest season.

That said, considering P23 per kilo was the average highest palay at end of last harvest and applying the rule of thumb re conversion from palay purchase price to retail rice selling price, it should not sell for more than P46 per kilo or double the purchase price of palay toward the end of the lean months or just a week or two before the next harvest.

Inasmuch as the numbers show that present commercial rice is within palay to rice conversion norm, then we should be happy for the farmers who justly received favorable return for their labor and risk.

Note: NFA’s (National Food Authority) participation and responsibility is to employ economic principles of supply and demand to influence market price. By injecting into the market subsidized priced NFA rice to temper commercial rice prices in the market, commercial rice prices would be dampened.

Since NFA claims to have sufficient rice inventory to weather the lean months, with inventory which is also to be augmented by their imports … there is no reason why rice market prices cannot be stabilized by the government given competent management and political will.

The reality we face is that we can’t and shouldn’t expect any businessman to sell at a loss. Their existence and purpose to exist is to earn a profit for their company and themselves; tempering their profit margins against their stakeholders’ tolerance.

Considering the palay to rice price conversion rule of thumb as a guide to rice market retail prices and accepting that businessmen need to realize a return on their investment efforts, the efficacy of NFA’s efforts to temper rice retail prices can’t be expected to do better than double palay price when converted into rice and sold at retail level.

The most we can expect with NFA intervention is to re-establish the pricing norm and the assurance of sufficiency of supply to arrest panic in the market. We must remember that the rice traders account for the majority of the national rice inventory.

We should be aware that due to the significant price differential between NFA subsidized rice prices and commercial rice prices, it is very difficult to avoid unpatriotic businessmen who will result to diversion to gain unholy profit (the Bureau of Internal Revenue   should step in here).

Even as NFA zealously tries to arrest this occurrence, it cannot and has not ever succeeded. All efforts in this direction are just for political consumption and do not help at all to arrest the problem of runaway rice retail prices.  NFA’s role is to assure rice supply and temper retail rice prices by intervening when the market is experiencing pricing abnormalities by injecting subsidized NFA rice into the market.

Media and the public should not be suckered into a false perception that actions as mentioned above are effective and will provide resolution to the problem. Truth is, it is only being done to address public outcry against government failure and management incompetence. It is government’s way of diverting attention and blame away from themselves.

Assuming today’s market price for rice is in order, we should be happy for our farmers and expect that with more disposable income in the hands of the farmers, this will have significant positive impact on our economy.

The improved disposable income in rice producing areas is the most effective pump-priming/job generation program the government can (wittingly or unwittingly) effect to deliver inclusive growth. The increase in demand for goods and services will provide more jobs in salary-dependent urban areas.

As a suggestion to the NFA to address the high rice prices, it is not sufficient to inject more rice through the retailers under the present program. Due to real logistical issues to improve the transaction velocity to retail rice, there is a need to address this bottleneck if we want rice retail prices to stabilize.

It would be wise for NFA to suspend its ‘per customer rice purchase limit’ to address the current rice price concern and allow retailers to temporarily sell a maximum of whole 50kg sack per customer. This will put NFA rice in the hands of consumers, improving the transaction velocity of subsidized NFA rice. Addressing the transaction velocity problem would dampen the temptation (especially since NFA is importing the same commercial rice specs of 15% broken plus the substantial price differential between subsidized NFA rice and commercial rice prices) to divert the subsidized NFA rice to be re-sold as commercial rice.

A policy moratorium on NFA’s ‘per customer purchase limit’ would flood the market with subsidized NFA in no time; giving retailers an attractive profit for their efforts in a manner consistent with law to arrest rising rice prices.

It will also temper the need for retailers to connive with corrupt NFA personal to clandestinely divert NFA rice to be re-sold as commercial rice.

I hope this helps put the situation into the right perspective in this time of crisis. No one wins if we exacerbate an already bad situation.

We need media’s help to put sanity and sobriety re the current rice price issue.

Media’s help to get the public to see the true picture would be the most positive and a responsible act to take.

Mabuhay tayong lahat!

(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a member of the MAP National Issues Committee and the Chair and President of the BNL Management Corporation. He previously served as Administrator of the NFA. Feedback at <[email protected]> and <[email protected]>.  For previous articles, please visit <map.org.ph>)