Blaming rice cartels for price manipulation cannot be considered a definitive explanation of last year's rice price hike. Sharp drop in imports is a more logical and evidence-based explanation, according to a study by state think tank Philippine Institute for Development Studies (PIDS).
Written by Dr. Roehlano Briones, PIDS Senior Research Fellow, and Ivory Myka Galang, PIDS Research Analyst, the paper cited the inadequacy of supply starting in mid-2013 due to the reduction in imports as the main cause of the rice price spike.
The retail price of rice shot up to PHP36.28 in December 2013 from PHP32.37 in June 2013 - 12-percent increase in just six months.
The ability of rice traders to influence the market price of rice is negligible according to the study. Citing a 2014 rapid appraisal conducted by Beulah dela Pea, "strong competition prevails at all levels of the rice supply chain. Farmers can freely choose their buyer among a number of buying stations and agents present in their community."
The study noted that rice imports dropped by 638,000 tons in 2013 due to the Department of Agriculture's Food Staples Sufficiency Program (FSSP). The program aims for 100-percent rice self-sufficiency in 2013 by raising domestic production and curbing imports.
But the increase in rice domestic production in 2013 has not been enough to reduce imports, the study noted. "While palay production did hit 18.44 million tons in 2013, up from 18.03 million tons, the increment of 439,000 tons was not enough to counter the effects of the reduction in rice imports."
The country failed to take advantage of cheap rice available in the world market because of import reduction, the study said. This led to a shortage of the rice supply, which raised the market price of rice. For example, in November 2013, the domestic price of rice per kilogram was PHP33.55, 28 percent higher than the world price of PHP18.63 per kilo.
The NFA could have abated the price spike had it offset the deficit from its buffer stock. This would have been possible if the stock was not limited, yet the total NFA stock in June 2013 was already low to begin with. The NFA is also facing intense pressures to reduce its liabilities and subsidy. "The buy high and sell low business model of NFA has placed intense pressure on its finances which amounted to $4.39 billion in total liabilities."
"A permanent solution is to repeal the QR (quantitative restriction) policy on imports to support the rice self-sufficiency objective," the study said. Rice self-sufficiency should be pursued with more cost-effective support mechanisms to rice producers such as research and development and new rice farming technologies.
Moreover, reforming the NFA is recommended, the study said. "It should focus on regulatory duties and management of the domestic food security stock and not on rice marketing and importation."
If you want to read the full study, you may download this link: http://dirp3.pids.gov.ph/webportal/CDN/PUBLICATIONS/pidspn1408.pdf
Written by Dr. Roehlano Briones, PIDS Senior Research Fellow, and Ivory Myka Galang, PIDS Research Analyst, the paper cited the inadequacy of supply starting in mid-2013 due to the reduction in imports as the main cause of the rice price spike.
The retail price of rice shot up to PHP36.28 in December 2013 from PHP32.37 in June 2013 - 12-percent increase in just six months.
The ability of rice traders to influence the market price of rice is negligible according to the study. Citing a 2014 rapid appraisal conducted by Beulah dela Pea, "strong competition prevails at all levels of the rice supply chain. Farmers can freely choose their buyer among a number of buying stations and agents present in their community."
The study noted that rice imports dropped by 638,000 tons in 2013 due to the Department of Agriculture's Food Staples Sufficiency Program (FSSP). The program aims for 100-percent rice self-sufficiency in 2013 by raising domestic production and curbing imports.
But the increase in rice domestic production in 2013 has not been enough to reduce imports, the study noted. "While palay production did hit 18.44 million tons in 2013, up from 18.03 million tons, the increment of 439,000 tons was not enough to counter the effects of the reduction in rice imports."
The country failed to take advantage of cheap rice available in the world market because of import reduction, the study said. This led to a shortage of the rice supply, which raised the market price of rice. For example, in November 2013, the domestic price of rice per kilogram was PHP33.55, 28 percent higher than the world price of PHP18.63 per kilo.
The NFA could have abated the price spike had it offset the deficit from its buffer stock. This would have been possible if the stock was not limited, yet the total NFA stock in June 2013 was already low to begin with. The NFA is also facing intense pressures to reduce its liabilities and subsidy. "The buy high and sell low business model of NFA has placed intense pressure on its finances which amounted to $4.39 billion in total liabilities."
"A permanent solution is to repeal the QR (quantitative restriction) policy on imports to support the rice self-sufficiency objective," the study said. Rice self-sufficiency should be pursued with more cost-effective support mechanisms to rice producers such as research and development and new rice farming technologies.
Moreover, reforming the NFA is recommended, the study said. "It should focus on regulatory duties and management of the domestic food security stock and not on rice marketing and importation."
If you want to read the full study, you may download this link: http://dirp3.pids.gov.ph/webportal/CDN/PUBLICATIONS/pidspn1408.pdf
