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Commentary

Suggested retail prices help consumers, farmers

Suggested retail prices (SRPs) can help consumers get lower prices and farmers obtain higher prices for their produce.

This is accomplished by computing a reasonable margin between the consumer’s retail price and the farmer’s farm gate price. The middlemen will thus be prevented from getting huge margins at the expense of both the consumers and the farmers.

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Last June 27, I wrote about the need for agricultural product SRPs to bring down prices. In the last 10 years, it was a practice used for industrial commodities but neglected for agricultural products. On Sept. 11, we submitted this recommendation to the National Price Coordinating Council (NPCC), which endorsed it. On Sept. 26, the DA announced SRPs for chicken and pork liempo at P125 and P185, respectively.

We constructed the table below using numbers from DA’s Bureau of Agricultural Statistics and the Samahang Industriya ng Agrikultura (Sinag):

FEATURED STORIES

Item Chicken Pork Liempo

Farmgate Price (9/26) 75-82 106-120

Suggested Retail Price (9/26) 135 185

Prevailing Price (10/18) 140 210

Price Two Months Ago (8/15) 150 210

The table shows there is good news for chicken prices. The P150 per kilo retail price two months ago has gone down to P140 (though still above the P135 SRP).

The farmgate price, meanwhile, has increased from P82 to P90. This means the middleman’s margin of P68 (P150- P82) has decreased to only P50. The result is that the consumer has a price decrease of P10 while the farmer has an increase of P8.

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However, there is bad news for pork liempo. The P210 retail price two months ago and the farmgate price of P120 have remained the same. Sinag chair Rosendo Su said the difference between the live hog farmgate price and the pork liempo should be P65, which the SRP assumes.

But while the prevailing chicken price is only P5 more than its SRP, the prevailing pork liempo price is P25 more than its SRP. If the SRP worked for chicken, why did it not worked for pork liempo? This question should be answered immediately, especially since the Christmas season is coming.

When we talk of cartels, we often think of big corporations. But as the Alyansa Agrikultura recommended in a Congressional hearing on a Competition Bill, pocket cartels on a smaller scale, especially for agricultural products, should likewise be investigated and penalized.

Especially for pork, action should be taken against the middlemen between the farmer and the retailer who connive to agree on unreasonably large profit margins. If the pork SRP is implemented effectively, the consumer would get a lower price, the farmer a higher price, and the middleman’s margin decreased from P90 to the more reasonable P65.

The SRP can also be used as a guide for both government and private sector policy on investments, fiscal incentives, and importation.

When there was no chicken SRP, the government and the private sector relied on its published prevailing retail price. In reality, these prevailing prices far exceeded the reasonable retail price because the middleman was getting an unreasonably large margin, while the farmer was getting an unreasonably low price.

But since the government and policy decision makers thought that the farmgate price was higher than it actually was, an excess of investments, fiscal incentives, and importation created an oversupply in the poultry industry. This lead to further decreasing the farmgate prices of the poultry raisers.

Essential industrial goods have consistently had SRP identification and enforcement for the last 10 years. But this has been sadly absent for agricultural commodities. The Sept. 26 announcement of chicken SRPs has shown the benefits of SRP.

The implementation of the hog SRPs has yet to be investigated. But on the whole, it is clear that SRPs for agriculture products should be reinstated after a decade-long absence for the benefit of consumers, retailers, and government and private sector decision makers.

(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, e-mail agriwatch_phil@yahoo.com or telefax (02) 8522112).

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TAGS: Agriculture, Commentary, ernesto m. ordonez, farm gate prices, farmers, livestock, poulty, Prices
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