Addressing high rice prices

To effectively address high rice prices for the benefit of both farmers and consumers, we must understand their root causes. We should then implement the legislated Price Act and simultaneously learn from the lessons of the past.

Below is a table on June prices sourced from the Bureau of Agricultural Statistics:

RICE PRICES (Php)

2014  2013  Difference

Farm Gate   20.83 16.53       4.30

Regular Milled    31.92 38.93      7.01

Well-milled 35.45       42.19 6.94

Since the majority of our people eat well-milled rice, we will focus our analysis on this. We should recognize that the P42.19 price per kilo is an average, with numerous retail outlets today selling at P45 or more.

Should these latter outlets be penalized for profiteering? The Price Act addressed this problem in the past and successfully brought down prices.

Middlemen

The P6.94 difference in the well-milled retail price consists of two components. The first is the P4.30 that the farmer gets, while the remaining P2.64 goes to the channels between the farm gate and the retail outlet. Let us call these channels the “middlemen.”

We should not begrudge the rice farmer his P4.30 increase. After all, he earns well below the poverty line at an annual average of P25,000 and P50,000 per hectare for nonirrigated and irrigated areas, respectively. The recent farm gate price increases are due largely to the Bureau of Customs’ (BOC) successful antismuggling campaign.

Can the middleman’s margin be at practically the same level as last year’s, except for a small increase due to inflation? Let us assume this increase is 5 percent of the current P2.64 margin, or P0.13. The resulting retail price will be P39.88, a starting point for determining the rice SRP. Adjustments can then be made upward or downward after the recommended consultation with stakeholders such as the farmers, middlemen, and consumers.

Last June 26, the National Food Authority (NFA) took the admirable initiative of meeting with the Alliance of Filipino Farmers and Rice Retailers Association (Affrra). Affrra generously passed a resolution to bring down the price of rice to P39 in Muntinlupa, Pateros, Mandaluyong, Taguig, Parañaque, Pasay, Las Piñas, and Makati. What should we then do with those selling at P45 and above?

Price Act

In the legislated May 27, 1992 Price Act, the head of the implementing agency (the DA or the DTI) can issue “suggested reasonable retail prices for any or all basic necessities and prime commodities.”

He can then “conduct investigations of any violation of this Act” and impose administrative fines from P1,000 to P1 million. One such violation is profiteering. This is defined as “the sale or offering for sale of any basic necessity or prime commodity at a price grossly in excess of its true worth.”

In a Sept. 6, 2013 Price Act amendment, this responsibility remains. It restated that rice is a basic necessity. Garlic remains a prime commodity, where SRP can also be implemented. Thus, for a P400 per kilo garlic price, which is way above an SRP, the retailer can clearly be charged with profiteering. But since there is no garlic SRP, no one is charged and profiteering continues.

The SRP mechanism should be implemented to stop the runaway rice prices that constitute profiteering. SRP is much better than price control, because SRP allows flexibility in its implementation. For example, if a retail outlet is in a distant place, accommodations can be made for higher pricing because of higher costs. But where there is no valid reason, exploitative profiteers should be penalized. Word will spread, and others will bring down their prices to reasonable levels to avoid penalties.

Today, this is done very successfully by DTI for goods such as milk and sardines. In the past, it was done equally successfully by DA for rice and other agriculture products, such as chicken and pork. There is no reason why DA should not do this today, especially for products like rice and garlic where obvious profiteering is taking place.

Other Actions

Importing an extra 200,000 metric tons of rice may be good, provided that this is not released at a time when they will depress farm gate prices, as has happened in the past. The recent June 25 published announcement that NFA was auctioning smuggled rice at a possible floor price of P15 a kilo sends the wrong message to both smugglers and farmers. Smugglers will again use dummies to buy this back, sell the rice at double the price, and make a mockery of the antismuggling campaign. The smuggled rice should instead be given or sold to NFA so that NFA decreases its rice imports.

To address the unreasonable high rice prices brought about by profiteers, the government must implement the Price Act, use the SRP mechanism, and learn from the past. This will undoubtedly benefit both the farmers and the consumers.

(The author is chair of Agriwatch, former Secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, email [email protected] or telefax (02) 8522112).