Market, farm sector still adjusting to liberalized rice trading regime

The liberalization of rice importation is envisioned to ensure stable supply and prices of the staple in the local market while improving the productivity and competitiveness of the Philippine farm sector.

Since the enactment into law of the rice import liberalization measure in February, it has so far succeeded in addressing the supply angle with prices going down, indeed, but at rates that seemed to be already hurting local farmers.

Republic Act No. 11203, or the Rice Liberalization Act, removed restraints on the importation, exportation and trading of rice. Restraints on imports were replaced by tariffs.

The Bureau of Customs has reported a 422-percent increase in the volume of rice shipments that entered the country following the passage of the rice import liberalization act.

In the first four months of the year, imports rose to 966,690 metric tons from 185,100 MT. At this rate, the US Department of Agriculture has projected that the Philippines could be the second largest importer in the world this year, as imports were expected to reach a record 3 million MT—just 500,000 MT short of China’s rice importation requirement.

The foreseen abundance of the staple in the local market has led to the fall of rice prices to an average of P38.50 a kilogram as of the fourth week of June, down 5.23 percent from year-ago levels and 15 percent lower from rates in September last year. The policy has enabled consumers to buy more at reduced prices, which is especially crucial for poor families whose biggest expenditure was for food.

On the whole, the availability of cheap rice imports was able to soothe the country’s inflation rate, which reached 6.7 percent in September last year—the highest in nine years. During that time, rice prices hit a high of P100 a kilo in the Zambasulta (Zamboanga, Basilan, Sulu and Tawi-Tawi) region, and in the capital, P50 a kilo.

Economic managers and supporters of the policy have pointed to the declining prices of rice as a proof that deregulation was working. The real question, however, is whether it is worth the measure’s negative consequences.

Since the start of the import liberalization, the farm gate price of palay has reached its lowest in almost three years at P17.85 a kilo. In the provinces of Davao and Surigao, rates have plummeted to P14 and P15 a kilo, respectively.

Under the new rice law, the government is mandated to subsidize the sector with a P10-billion fund, which would be used for the purchase of machinery and equipment, seed subsidy, provision of credit, and training and seminars—initiatives that are aimed to lower the cost of producing rice and make local producers competitive.

Once the subsidy is exhausted, import duties from rice would be funneled into a so-called Rice Competitiveness Enhancement Fund (RCEF) to maintain the continuity of the fund’s shelf life, which economic managers have estimated to reach P28 billion yearly.

But not even the RCEF may save farmers from falling palay prices.

Socioeconomic Planning Undersecretary Rosemarie Edillon said it might take at least three years before palay prices would stabilize, which would fall on the last year of the current administration’s term.

“It would take some time to find that steady state because players are trying to find that balance in the new rice regime,” she said. “Not even the funds [could help] because when the funds are disbursed, they will still need to reach the farmers. It may take three to five years before it stabilizes.”

With no immediate relief in sight, farmers continue to be tied to the movements of the market that remains beneficial for both consumers and importers, but not to them.