August 12, 2024 | 12:00am
The good news is, GDP expanded by 6.3 percent year-over-year in the second quarter versus a revised 5.8 percent in the first quarter, according to the Philippine Statistics Authority. The not-so-good news is that agricultural production contracted by 3.3 percent year-over-year, contributing to higher food prices and a higher inflation rate.
The headline inflation or overall inflation increased to 4.4 percent in July from 3.7 percent in June. The heavily-weighted food and non-alcoholic beverages index increased to 6.4 percent in July from 6.1 percent in June, contributing to the faster annual overall inflation growth rate. Food inflation at the national level rose to 6.7 percent in July from 6.5 percent in June. Rice inflation has slowed but remains high and is still the number one contributor to overall food inflation at 20 percent, according to PSA data.
The country’s poorest are the hardest hit by inflation. According to the PSA, inflation for low-income households, or the bottom 30 percent of households, increased to 5.8 percent in July from June’s 5.5 percent.
“Food is big for the bottom 30 percent of income households. Their food expenditure, as a percentage of their income, is more substantial. In our basket, the weight of food for the bottom 30 percent is around 51.38 percent,” according to National Statistician Dennis Mapa. The weight of rice in the inflation felt by the bottom 30 percent of income households is about 70 percent. That’s why the price of rice is a political issue.
Despite the lower tariff on imported rice, Mapa noted that the reduction in rice prices seen in July was not significant. The PSA chief said the average price per kilo of regular-milled rice in July stood at P50.90, down 0.3 percent from P51.10 per kilo in June. Well-milled rice also saw a slight reduction by 0.2 percent to P55.85 per kilo from P55.96 per kilo month-on-month. The price of special rice eased by 0.2 percent to P64.42 per kilo from P64.56 per kilo in the prior month.
The BBM administration’s response to the rice price crisis is the Rice-for-All program launched on Aug. 1. The program will supposedly enable the general public to buy rice at P45 per kilo at select Kadiwa outlets, if you are lucky enough to find one in your area. There was an earlier program that supposedly enabled vulnerable sectors to buy heavily subsidized rice at P29 a kilo at some Kadiwa outlets.
The response is more political theatrics and not sustainable. The government buys palay at up to P30 a kilo and then sells milled rice for P29. An agricultural economist in one of my Viber groups estimated that P9 billion earmarked for the program buys less than two percent of the demanded rice. He thinks that if the government wants to help the poor, targeted rice vouchers handled by the DSWD would be better.
The DA has a good excuse for the food supply problems: El Niño. The agricultural sector’s production in the April to June period amounted to P413.91 billion, about P14 billion lower than the P427.948 billion recorded in the same period last year, according to the PSA. The contractions are across the value of 20 crops, with sugarcane posting the steepest decline at 42.3 percent. Palay fell by 9.5 percent year-over-year, while corn output declined by 20.3 percent.
Lowering the tariff on imported rice was theoretically supposed to bring down retail prices. But that’s not how the real market works, apparently. Rice import arrivals slowed down as importers wanted to sell their previous imported stocks bought at the higher tariff rate.
Traders remain cautious in bringing in new shipments pending the Supreme Court resolution of a petition against Executive Order (EO) 62, which lowered rice tariffs. Bureau of Plant Industry data as of July 20 showed only 56,073 metric tons of rice were imported and levied with a lower 15 percent tariff rate. That’s nowhere near the average monthly import arrival of about 400,000 metric tons from January to June.
DA officials are expecting the import arrivals to pick up in the coming weeks, with a substantial volume entering this month that would have a “significant” effect on pulling down retail rice prices in the market. The PSA chief is now saying that maybe the effect of lower tariffs will be felt this month.
In the end, the thought that a lower tariff would result in lower rice prices proved theoretical. Or maybe it needs time, but the government doesn’t have the luxury of time. As a result, some are disappointed that the lower tariff and lower rice prices in the world market didn’t do anything for rice consumers. Farmers and millers may have been unnecessarily hurt. To recall, the government earlier said tariff reduction for imported rice could reduce the retail price per kilo of rice by P6 to P7.
As expected, the DA spokesman said, “The Philippine agriculture sector has demonstrated resilience…” Hopefully, as the DA Secretary gets to know his assignment better, the DA will do better than just showing resilience. It is time to show an honest-to-goodness agricultural program that supports farmers through better seeds, improved financial support, a more effective farm mechanization program, better irrigation and a more extensive logistics system to include storage now controlled by traders. And don’t forget that rice millers are part of the marketing chain and some are also hurting.
Much hope has been pinned on Secretary Francis Tiu Laurel to bring private sector entrepreneurial spirit into our lagging agricultural sector. He had to do some firefighting with El Niño, but he can’t be doing ad hoc measures and firefighting for the rest of BBM’s term. That’s a waste of his talent and experience.
Boo Chanco’s email address is [email protected]. Follow him on X @boochanco.
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