8 Sept 2019 – Federation of Free Farmers says MANAGING ENTRY OF RICE IMPORTS IS KEY TO ADDRESSING PALAY PRICE PROBLEM
The Federation of Free Farmers (FFF) urged government to focus on the root cause of the drastic drop in palay prices nationwide instead of relying on palliative measures that are either too expensive or ineffective. Reports indicate that palay buying prices have gone down to as low at Php 7/kilo and are expected to deteriorate further as the main harvest season peaks in October 2019.
Raul Montemayor, National Manager of the FFF, noted that the drop in palay prices coincided with the inflow of large volumes of rice imports since January 2019, particularly following the passage of the Rice Tariffication Law. “Data from the Bureau of Customs (BoC) shows that about 2.4 million tons have arrived as of July 2019. This is around 17% of the country’s total consumption requirement for the year. But we actually need to import only 10% of our needs because we can produce 90%. So, there is already an excess supply of 7% in the market and this glut will become worse if more imports come in and coincide with the main season harvest.”, explained Montemayor.
“Because of too much supply of imported rice in the market, local traders cannot unload their stocks at a profit. And they have to adjust their buying price from farmers so that they can compete with the cheaper imports. This explains why palay prices are falling down.”, added Montemayor.
The FFF has suggested that the government immediately impose special safeguard duties on rice imports, and avail of other trade remedies such as anti-dumping and general safeguards. These measures will allow the government to temporarily impose additional duties on rice imports, thus making them more expensive. The FFF has also supported the more stringent application of pest and disease and food safety controls on rice imports.
“Government must focus on the supply side, because that is where the problem is coming from. It must find a way to manage the inflow of imports until the supply glut disappears and farmers and traders are able to unload their stocks. Our studies show that even with these measures, rice prices need not go up because imported rice will still be much cheaper even with the additional tariffs.”, said Montemayor.
“Increasing government buying of farmers’ palay will help, but it will never be enough for as long as the cheap imports continue to come in. The current Php 7 billion budget of the National Food Authority (NFA) can buy only about 412,000 metric tons (MTs) of palay at Php 17 per kilo. This is only 2% of the country’s annual output and rice requirement. If they want to absorb 10% of the output, they will need Php 35 billion. If they want NFA to have a buffer stock equivalent to 90 instead of only 15 days, they will need to invest around Php 80 billion. Where will they get that money? And where will NFA and the LGUs store all that palay? And when they decide to sell their stocks in the market, they might end up with huge losses because they bought at a high price. Are they willing to absorb such losses?”, asked Montemayor.
“In 2018, farmers were enjoying very good prices above Php 20 per kilo even without NFA having to buy a single kilo of palay. Why? Because there was a tight supply of rice in the market and the NFA ran out of stocks to control the market. This shows that palay prices can be influenced through proper demand and supply management without government having to directly intervene in the market.”, added Montemayor.