Who is advising the DA secretary?

WITH 13 undersecretaries and an equivalent number of assistant secretaries, the Department of Agriculture (DA) secretary should have the privilege of being given the best and science-based advice on the proper responses to the many challenges facing the sector. Sadly, recent pronouncements make it doubtful whether he has been accorded sound and judicious advice by his lieutenants.

Recently, the secretary claimed that the reason why rice prices remained high was because traders who imported at a higher tariff of 35 percent were still disposing of their old stocks. This is after the President issued Executive Order (EO) 62 lowering the rice tariff to 15 percent in July and a significant reduction in the global rice prices of around 8-10 percent.

Why does the secretary seem to be acting as an apologist for traders who are engaging in cartel-like behavior? Isn’t reducing rice prices (as intended by EO 62) the proper role of the DA rather than justifying the behavior of traders who fear losing hefty profits as a result of the entry of cheaper rice imports?

Why has DA not taken the necessary measures to ensure that rice imports at lower tariff enter the country to immediately tame prices? Are traders’ interests more important than those of more than a hundred million Filipino rice consumers?

Then, as a “pampalubag loob” or appeasement, the secretary predicted that rice prices would start to fall in October. Didn’t anyone of the 13 undersecretaries and 13 assistant secretaries advise him that October is peak palay (unmilled rice) harvest season? And that during peak harvest, palay farmgate prices historically decline and so do rice prices?

Have any of the secretary’s lieutenants informed him that the massive entry of rice imports at lower tariff would lead to a further decline in palay farmgate prices? And that historically, such a decline normally results in a series of vociferous protests from farmer lobby groups and their leftist allies?

Like a script in a movie, the situation will provide the justification to resort to the populist stance of raising the rice tariff again. Which will most likely happen because a petition filed by agricultural lobby groups questioning the legality of the President’s issuance of EO 62 is still in the Supreme Court.

Additionally, have any of the secretary’s lieutenants informed him that traders usually have a heyday buying palay at low prices from farmers during the October peak harvest season? After the procurement, traders dry and store the palay in their warehouses, waiting and expecting rice prices to once again rise given peak demand during the Christmas season.

If a petition to raise rice tariff is granted, a decision that will surely be delayed given our slow legal process, it is most likely that small farmers will no longer benefit from high palay prices because the peak harvest season will be over. By the end of November, most of their palay would have been sold at low prices. In other words, the main beneficiary of increasing the tariff once more will be traders.

Then there was this pitch by the DA secretary that the government should be investing in constructing more ports because congestion is a major culprit in raising food prices, particularly rice, only to be rebuffed by the general manager of the Philippine Ports Authority (PPA) that port utilization in the country averages only 60 percent, reaching a peak of 90 percent during the Christmas holidays and Chinese New Year.

It was also revealed by PPA that there were hundreds of container vans of rice imports, estimated to be around 500,000 metric tons, lying in port dockyards. Why has DA not pressured rice traders to immediately claim their imports and release these to the market to reduce rice prices? Why become the spokesman for traders by claiming that rice prices are not going down because importers are still disposing of old stocks?

As part of its logistics mantra, the DA is claiming that agricultural and food prices will significantly decline if we address logistics bottlenecks in ensuring food availability. There are even statistics cited that postharvest losses amount to more than 30 percent of production.

Note that the figures on postharvest losses will depend on the product being handled. Perishables like vegetables, fish, meat products, etc., in the absence of proper cold storage facilities, will experience higher postharvest losses. Non-perishables like rice and corn will have lesser postharvest losses.

Since more than 60 percent of the DA’s budget is devoted to supporting rice programs, most of the logistics and postharvest facilities are expectedly going to support rice. Will this lead to a substantial decline in rice prices, assuming logistical bottlenecks in rice are successfully addressed by the department?

A group of Philippine Rice Research Institute researchers conducted a rice value chain study (Mataia, et al., 2020) that partly answers this question. They found out that the logistics costs of rice handling represent just over 10 percent of the final retail price. The team also noted that more than 50 percent of the rice retail price is accounted for by production costs. In other words, based on a scientific study, lowering logistics costs will little dent the final retail price of rice, but reducing production costs will work wonders.

With PPA’s exposé that large stocks of rice are sitting in dockyards, traders are now in panic withdrawing them in order to avoid being accused of hoarding. The DA declared that it would be inspecting PPA’s facilities to force traders to claim their imports and sell them to the market.

The immediate market response was a significant reduction in the rice price by at least P5 per kilo. This could have happened much earlier if the DA took the necessary steps in forcing traders to release their hoarded rice, benefiting millions of rice-eating Filipinos.

The problem now is that palay farmgate prices have also gone down to P18-P20 per kilo from P23 and above. If prices further decline, nearing the palay production cost of around P15 per kilo, that will result in a lot of protests by farmers’ groups and their allied lobby groups against the decision to reduce the rice tariff to 15 percent.

Expect this dynamic to unfold in October.

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