Philippines: Govt. subsidy program to offset rice price hikes.

This is from the daily Tribune.

The price of rice in the Philippines is almost half of what it was at its peak. However as the report projecting prices notes there is less investment globally in inputs due to the credit crunch. As a result the total rice production may decline without a corresponding decline in demand. As a staple, rice demand is less elastic than with many other commodities. Also, declining incomes for many in the Philippines may mean hardship even if the price of rice does not reach its peak of last year.


Palace subsidy program to offset rice price hikes
By Riza Recio
01/11/2009
Malacañang yesterday expressed optimism the price of rice would remain affordable throughout the year even as it assured the people of its readiness to implement a contingent rice-subsidy program to soften the impact of a sharp rise in the price of the country’s staple crop.
Cerge Remonde, head of Presidential Management Staff, made the assurance following the reported forecast by the International Rice Research Institute (IRRI) that the price of rice would rise sharply this year owing to the worldwide credit crunch seen to make it hard for farmers to secure cash to purchase essentials such as seeds and fertilizer.
IRRI’s forecast is contained in its latest edition of quarterly journal Rice Today.
In an interview over Radio ng Bayan, Remonde expressed surprise over the IRRI forecast as he noted that domestic rice production posted “good harvest” in recent months. Remonde’s PMS regularly monitors government programs and projects, including those that pertain to agricultural production.
Nonetheless, Remonde said the IRRI forecast had prompted the Arroyo government to fine-tune its rice subsidy program, which it launched last year when world crude oil price soared to more than $100 a barrel.
But even when world crude oil price tapered off and slumped to just over $100 a barrel, the country’s economic managers crafted a contingency plan that would ensure the country’s sufficiency in food, including staple crops such as rice and corn, in critical times.
Malacañang said this contingency plan included a food sufficiency program that would effectively ensure that staple crops would be sold at affordable prices.
As reported by the Agency France Presse, the IRRI predicted that rice prices would likely to rise sharply for the second straight year in 2009 as the worldwide credit crunch would compel farmers to scrounge for cash to enable them to buy seeds and fertilizer.
The IRRI said the economic downturn would result in falling incomes that might compel the poor to switch back to less expensive staples.
The price of rice rose to $1,080 a ton last April, triggering fears of social unrest.
It slid to about $575 dollars six months later due to record production.
Despite this record production, the IRRI said “production uncertainty due to tight credit and declining rice prices combined with strong demand growth points to another rise in rice prices in the coming months.
Even if they had the cash, the IRRI said, farmers burned by the sudden plunge in commodity prices “will likely play safe and reduce input for their 2009 crops.”
The institute pointed to a decision by the Philippines government to lower its 2009 rice output estimate by almost four percent, and said a similar move from other rice producers “is likely in the near term.”
While global rice output reached record levels for each of the last four years, this was achieved through increased acreage and obscured the key issue of declining growth in rice yields owing to reduced agricultural investments since the early 1990s, the IRRI said.
As the world consumed more rice than it could produce in five of the last seven years, it forced governments to dip into their reserves to make up the shortfall.
Historic low levels of rice stocks contribute to the volatility, it added.
While rice prices have dropped from their 2008 peaks, the IRRI said, “they are still high relative to 2007 levels, and are likely to remain too high for millions of poor.
“If the yield growth rate does not improve, we can expect rice prices to continue to rise, and at a faster pace than that seen since prices started moving up in 2000.”
The institute said the only solution was to boost rice yield growth through higher investment in research, and developing agricultural infrastructure to allow rice farmers to put new scientific breakthroughs to work.

How to Balance Farmer and Consumer Interests

This is from the Inquirer. So one reason that there is not greater Philippine production is because the Agriculture Department received only half their budget at least until the government finally realises it must do something. The Arroyo govt. has also increased it support price by 5 pesos a kilo.
The author seems optimistic about the efficacy of voluntary price controls but I just wonder how well that will work.



How to balance farmer and consumer interests


By Ernesto Ordoñez
Philippine Daily Inquirer
First Posted 01:11:00 04/12/2008


MANILA, Philippines--The fact is that there is no rice supply shortage today. We have a 54-day buffer stock, ongoing harvests, and arriving importations.

However, there is a shortage in our own rice production. That is why the government is planning to import 2.2 million metric tons of rice this year, almost four times the 0.6 million tons we imported in 2000.

If the imports do not come, then we will have a full-blown rice shortage and crisis.

In fairness, the government did not give the Department of Agriculture (DA) an adequate budget during the past decade. Instead of providing the minimum P32.7-billion annual budget required by the Agriculture Fisheries Modernization Act since 1998, the DA received an average budget of only P16.7 billion, half the mandated amount.

It is therefore most welcome that President Gloria Macapagal-Arroyo has announced a P43.7-billion support for food supply.

It is hoped that the rice master plan we started in 2002, but abandoned in 2003 with new management, will be resurrected and completed this year. This way, the budget for rice will be spent effectively, guided by this plan, instead of being subjected to possible political whims and knee-jerk solutions.

Impact on farmers

In their own April 1 food conference, Alyansa Agrikultura leaders representing 42 organizations recommended that the rice farmers should be given an increase in the government's support price for rice. The leaders noted that over the years, this price had barely increased, and was much lower than the inflation rate.

Three days later, these leaders rejoiced when President Arroyo announced that the National Food Authority (NFA) would increase its support price from P12 to P17 a kilo. The impact to farmer profits is shown in this table using data from the Department of Agriculture and other sources.

Price phenomenon

Unfortunately, because of some unscrupulous traders and retailers, this decision to help farmers has harmed many consumers. An example was reported in the Inquirer's April 10 issue: "A kilo of dinorado rice which was being sold two days ago at P35 was retailed at P42 per kilo yesterday." This is a 20-percent price increase in one day. Obviously, the retailer's cost did not go up by that much.

This phenomenon of unjustified price increases is happening not just to fancy dinorado rice, but also to the well-milled rice bought by the less fortunate great majority of our people.

An NFA official was quoted in many newspapers as saying that the justified retail price is double the farmgate price. Partly because of this and the announced new NFA farmgate price of P17, the retail price has been increasing recently from P28 toward P34.

First of all, the well-milled rice in the market today was bought at lower than the very recently announced P17 farmgate price. Therefore, the increased profits are going not to the farmers, but to the traders and retailers, all at the expense of the consumers.

Secondly, the long lines for NFA rice have given the impression that there is a rice shortage, which in turn motivates increasing prices. The shortage is not in rice, but only in NFA rice. This is sold at P18.25 per kilo, way below the alternative well-milled rice at more than P30 per kilo. Of course, there will be long lines, which will never be satisfied because there will simply not be enough cheap NFA rice.

It is true that retail price is normally about double the farmgate price. But this should not necessarily be followed. If the retailers and traders are satisfied with the same level of their profits, they should pass on to the consumers only the actual cost increases.

In the table above, the increase in farmgate price is P6. If the actual average retail price in 2006 was P24 (which is P2 more than double the price of the farmgate price), then the retail price should be P30, not P34.

It's happening again

But what should be the suggested retail rice price today? Given that the farmgate price at which the current rice supply was bought was below P17, and that there are added justifiable distribution costs that should be considered, the answer can best be given in a meeting with the traders and retailers themselves.

No to price controls

In 2006, when there was a similar perceived rice shortage and prices were increasing beyond justifiable levels, I participated in such a meeting. The retailers and traders, together with DTI and DA officials, computed the actual numbers and came out with a suggested retail price. It was below the prevailing market price that was escalating very rapidly then, a deja vu phenomenon that is happening today.

We agree with Trade Secretary Peter Favila that there should be no price controls, as there were no price controls in 2006. But that year, the suggested retail price (only for well-milled rice) previously agreed upon by the traders and retailers, was posted in the newspapers and the wet market price tags. This successfully brought down the price of well-milled rice.

Though there was no price control, retailers who sold at prices much higher than the suggested retail price were systematically asked what their justification was for their high prices. This was sufficient motivation for them to charge a fair price.

We recommend that this mechanism again be used to balance farmer and consumer interests. For consumers facing the almost daily unjustified price increases, we say: "The sooner the better."

(The author is the chair of Agriwatch, former secretary for Presidential Flagship Programs and Projects, and former undersecretary for agriculture, and trade and industry. For inquiries and suggestions, e-mail agriwatchphil@yahoo.com or telefax (02) 8522112).

Philippines hit by high global rice prices

This is from Australian Broadcasting. Vietnam along with some other Asian countries has moved to limit exports in order to have sufficient supply domestically.
Given the corruption within the Arroyo administration it remains to be seen how effective Arroyo's steps to improve the situation will be.

Philippines hit by high global rice prices

[This is the print version of story http://www.abc.net.au/ra/news/stories/200803/s2202625.htm]


Philippines hit by high global rice prices
Updated March 29, 2008 18:23:43



Commercial rice prices in Philippine markets have doubled in the past days, amid a tight global supply and denials by government officials of a shortage.

Shirley Escalante reports from Manila.

Rice prices in Manila have soared to as high as a dollar and 15 cents a kilo from as low as 50 cents a kilo a week ago. People in the countryside have started complaining of a lack of supply of cheaper, government-subsidized rice in the market. Meantime, President Gloria Arroyo convened her cabinet officials to discuss measures to sustain the country's rice supply and to control soaring prices. She ordered finance officials to relax tariff rates on rice, and wants a moratorium on the conversion of agricultural land, particularly rice land, to residential areas and golf courses. Authorities have also began inspecting rice warehouses and apprehending rice hoarders. Two provincial officers of the National Food Authority, the government agency which controls rice stocks, have also been suspended for failing to stop rice hoarders.






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