1 month ago
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Last week I wrote that an emerging legacy of President Ferdinand Marcos Jr.’s administration is its failure to bring the economy back to its pre-pandemic trajectory.
Another emerging legacy is Marcos’ miserable failure to manage rice supplies well.
Apart from the broken promise of bringing rice retail prices down to P20 per kilo (an impossible dream to begin with), rice reforms done during the Duterte administration have now been effectively reversed by Marcos.
Take for example what had happened on February 3, when the Department of Agriculture declared a “food security emergency” on the suggestion of the National Price Coordinating Council.
Is this really a food security emergency? What are they trying to achieve? Is this the best recourse?
First, let’s determine if there’s an emergency in a real sense.
If you look at the official document of the Department of Agriculture declaring the food security emergency, it cited rather old statistics: “WHEREAS…the Philippine Statistics Authority (PSA) reported that rice inflation in July 2023 reached 4.2 percent exceeding the upper limit of the 4 percent food inflation target of the Philippine Development Plan 2024-2028. Rice inflation further increased reaching 17.9 percent in September 2023.”
It continued: “rice prices remain elevated emphasizing that in December 2024, the price levels…were respectively 19 percent and 20 percent higher compared to the period before the spikes in July 2023.”
Yes, rice inflation was tremendously high in 2022 and 2023. But that means that high rice prices aren’t really new. Prices have been extraordinarily high for more than 1.5 years already.
More importantly, however, since April 2024, rice prices have actually been declining. This is part and parcel of the global decline of rice prices throughout 2024 (see graph below).
Hence, it appears that the Marcos administration declared a rice price emergency a tad too late, and amid an ongoing drop in rice prices. Not so much an “emergency” in the sense of being sudden or unexpected.
Reversing reforms
The main reason for declaring the “food security emergency” is that Marcos signed a law on December 9, 2024 called Republic Act 12078, an act amending the Agricultural Tariffication Act.
As explained by Marcos himself, “In cases of sudden rice shortages or price hikes, the DA will now be empowered to take the necessary actions to stabilize the market. This will help ensure that the price of rice remains affordable and accessible to every Filipino.”
Specifically, section 6 of the new law provides that, “The DA Secretary, upon the recommendation of the National Price Coordinating Council (NPCC), shall declare a food security emergency on rice due to supply shortage or extraordinary increase in prices.”
That’s exactly what the government did on February 3. After the declaration, the National Food Authority (NFA) is authorized to sell part of its rice buffer stock in government agencies or local government units (LGUs), or through the Marcos administration’s KADIWA stores (first introduced during the dictatorship of Ferdinand E. Marcos.) — and nowhere else. This release of buffer stock is meant to flood the market with rice, putting a downward pressure on prices.
Policymakers expect that rice can be sold at P35 per kilo. However well-meaning that sounds, there are many problems and red flags with this food security emergency.
First, the NFA’s rice buffer stock is not as large as Marcos thinks. It now stands at about 300,000 metric tons, and agriculture officials say they’ll need to release 150,000 metric tons in the next six months.
But my colleague Fermin Adriano, an agricultural economist and former agriculture undersecretary, commented that 300,000 metric tons distributed nationwide will last at most nine days!
Second, the government already projects that releasing the NFA’s buffer stock will result in at least P2.25 billion worth of losses. This stems from NFA’s age-old business model: buying rice high and selling it low. Essentially, the NFA subsidizes people’s purchase of rice.
We already moved away from this bad and unsustainable system with the passage of the Rice Tariffication Act in 2019, which liberalized rice importation and obviated the need for the NFA to intervene in the rice market. That law also removed NFA’s rice import monopoly, so that NFA was left to just maintaining an emergency rice buffer stock.
This was a major reform that economists applauded. But Marcos signed a law that reversed the reform and gave back to NFA the power to intervene in the rice market. In other words, the Marcos administration revived an old problem we had already solved, bringing us backward, not forward. NFA will once prove to be a drain on the government’s coffers — as if we don’t have enough fiscal and budget issues to go around.
Third, consumers and producers are unlikely to be elated by the NFA’s market intervention. Consumers will be sold a mix of regular, aging, and about-to-age rice — so the quality of rice they’ll be able to buy at a low price will be uneven.
Meanwhile, some retailers are already dreading the lower prices from the NFA, because they will likely be outcompeted and suffer losses — especially since rice prices are already on the downtrend. They might also want to hoard good-quality rice, at least until the NFA finishes releasing its buffer stock.
These unintended consequences are similar to the effects of the rice price ceilings that Marcos imposed in September 2023.
Go after the rice middlemen instead
This brings me to my next point: the recent food security emergency is a distraction, another stopgap measure that fails to address the real reasons for unusually expensive rice.
The best way to lower rice prices systematically is to make sure there’s ample supply of it — whether by boosting rice production domestically or importing rice from abroad.
The first is more challenging and involves many moving parts. The second is relatively easier, and Marcos indeed moved to import rice. Back in June 2024, for instance, he lowered rice tariffs from 35% to 15%. Despite this move, though, rice prices went down too slowly.
One reason for the disconnect between lower tariffs and lower prices is the considerable market power exerted by rice traders who gain a lot from the rice production value chain and hoard rice at the expense of lowly rice farmers and consumers.
If Marcos seriously went after these opportunistic middlemen (like imposing harsh penalties on hoarders and inspecting rice warehouses regularly), then the government would not have to declare a food security emergency and suffer the accompanying unintended outcomes. Instead of doing his homework, Marcos lazily resorted to giving the NFA more power to intervene during “emergencies.”
We must ask, then: why is the government seemingly helpless in the face of rice traders, hoarders, and cartels? Is the administration in fact protecting these unscrupulous rice industry actors to some extent?
Note that traders and hoarders can in fact benefit from Marcos’ food security emergency: while the government is flooding the market with cheap, low-quality rice, traders can hoard good-quality rice stocks, wait until the emergency is lifted, and then sell at high prices once the emergency passes. Traders may even find a way to access cheap rice from the NFA and resell them at higher prices.
All in all, Marcos is playing the hero in a crisis of his own making. He also resurrected zombies in the rice sector that we had already banished before.
Welcome back to the era of crappy rice policies. – Rappler.com
JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan) and Usapang Econ Podcast.
