Rice: national self-sufficiency versus consumer protection

In his most recent SONA, President Duterte made dark warnings about going after the rice cartels and rice smugglers. Perhaps, similar to the antidrug campaign, addressing the economic underpinnings of the situation will make for sound policies and practices.

Administration after administration has proclaimed that self-sufficiency in rice would be attained by the end of their term. The most ambitious, of course, was the Masagana 99 program undertaken by the late President Marcos that generously funded rice farmers. It later turned out to be one of the worst-performing programs as repayment rates reached such proportions that the program had to be shut down or else banks would fail without Central Bank support. The latest was the PNoy claim that rice selfsufficiency would be reached before the end of his term, as proclaimed by his unlamented Agriculture secretary.

The heart of the rice self-sufficiency program is economic: make rice farming really profitable such that more and more production, be it from increased riceland volume or increased yields or both, comes into play. As it is, when there are “perceived” shortfalls in production, the National Food Administration (NFA) will recommend that importation of “cheap” rice be undertaken.

This situation leads to ghastly corrupt practices as rice import licenses are handed out to favored traders or even when government-to-government trades are undertaken, through corrupt middlemen who overprice the “official” prices. This further hurts local farmers who have a chance to make better profits and secure their future and encourage them to produce more, leading to real self-sufficiency.

But then, consumers will raise a howl when rice prices are increased and this is where the smart operators will carry the cudgels for consumers by pressing upon the President, who will then authorize the NFA to import rice. Billions have been made by the issuance of licenses to traders for rice importations.

Where then, is the balance to be struck? There is the old Board of Investments approach, where local industry, in this case the rice farmers, will be given a period of, say, five years in which to improve their rice production methods and during which imports will face high tariff walls. Subsequent to the five-year improvement period, the tariff walls will be brought down either gradually or abruptly as the case so dictates. There is a system where open market rice prices will be allowed to rise to a pre-determined level that will allow local producers to make decent rates of return on production cost before allowing rice importations to ensue.

Our local rice production is not by any means substandard by quality. There are of course gradations that are determined by increasing rates of affordability from the most coarse to the best specialty rice grades. What is lacking is the ability to produce enough affordable rice of the C5 or better quality. This is the segment that is most affected by the rice imports. Imports constitute the best discouragement to the rice farmers as when they are poised to make a decent profit, the market is then flooded with cheap imports.

The government is the arbiter of where the dice will roll: to the consumers who will make a howl over high rice prices during shortages or to the farmers who need to accumulate more capital to produce more. In between are the importers and smugglers, who stand to make billions from imported rice.

As it stands, the NFA is one of the most heavily subsidized agencies of government as its mandate is in effect to: buy high and sell low. We cannot continue to waste hard-earned taxpayers’ money on schemes like these, which violate the basic law of supply and demand. We either set a long-term policy to attain rice self-sufficiency and cause a rise in prices, or open the markets completely to compete globally.

This will entail a policy shift that needs to wean farmers who cannot compete globally to shift to perhaps higher value crops. There were attempts to shift to okra and cut-flowers but these were half-hearted and later failed.

In the meantime, the Filipino farmers, consumers and taxpayers are at the mercy of the rice traders and their cohorts at the NFA.