President Ferdinand Marcos Jr. has made it a campaign promise to bring down rice prices to P20 per kilogram.
Yet the first half of his term saw the highest rice prices in years, forcing the government to roll out a slew of drastic interventions: the price cap in 2023 and a food emergency in February.
Produce and food production projects are commanding one-fourth of the P200 billion budget for the Department of Agriculture this year, the highest in the last five years. Around P21 billion has been earmarked for the national rice program.
While demand and supply still hold the largest influence in setting prices, experts say the key is to address challenges in every step of the value chain—a gargantuan task for a multilayered, complicated and “chaotic” industry.
“Kapag sinabi mong pano pabababain sa retail, tutumbukin mo ‘yan pababa [sa value chain]. Saka saan nagkakaron ng layers na pwe-pwedeng magcontribute sa mataas,” Raul Montemayor, national manager of the Federation of Free Farmers (FFF), told the Philippine Center for Investigative Journalism. “Bawat pasa [ng palay, bigas] merong mark-up yan e.”
The industry still lacks adequate infrastructure, from disconnected irrigation systems to road networks. Experts say these remain burdensome for players in the industry.
“Basic infrastructure, irrigation is still very much an issue,” agriculture policy expert Roehl Briones, senior research fellow at the Philippine Institute for Development Studies, told PCIJ.
“Efficiency in the usage of water has been eliminated because of free irrigation. Unless you bribe the irrigators association, it’s difficult to roll out water efficiency technologies like alternate wet and dry. These are the unintended consequences of something ostensibly in favor to protect, support the farmer.”
The government has also blamed hoarders and a “rice cartel”—but can they thrive in the current industry?
The PCIJ interviewed various experts in the rice production industry to pin down factors that influence pricing. Here’s their take:
1. Logistics, pass-through fees, bribes
Bringing rice grains from farms to plate in the country remains an expensive process, according to FFF’s Montemayor. Local government units also collect pass-through fees, which add to the transport costs. Some local governments even impose truck bans. Bribes run rampant too, he said.
“Mahal pa rin kasi from the farm to the trader, from the trader, miller. May transport ka dyan. So kung sira-sira ang kalsada or maraming nangongotong—that is a cost,” Montemayor said.
“Lahat nung mga extra costs na ‘yan kino-compute ‘yan ng mga negosyante and then dun nila babawiin sa mababang presyo sa pagbili ng palay. Para maibenta naman nila sa bigas na kikita sila. So kapag mahal ‘yung cost, ang tendency ay tataas ang presyo ng bigas. Kasi that’s the cost for bringing the rice all the way to the consumer,” Montemayor explained.
2. In-kind payments: Leasehold system, moneylenders
Some farmers still don’t own their land and rent farm lots from friends, relatives or other farmers. Farmers who engage in such an agricultural leasehold system usually use a portion of their harvest to pay for debts. This ranges from 12 to 15 sacks or depending on the value of the debt, according to Rafael Mariano of the Kilusang Magbubukid ng Pilipinas (KMP).
It doesn’t end there. Most farmers also depend on local money farm lenders or usurers who allow them to borrow either money or farm inputs such as fertilizers. Sometimes, even owners of machine harvesters or traders get a portion of the palay—if farmers owe them money.
“Ibig sabihin may napunta sa land owner, may napunta sa usurer, may napunta sa owner nung combined harvester, o may mapupunta kaagad na palay sa kamay ng palay trader. Ibig sabihin dun pa lang meron nang nakaka-kopo nung malaki-laking ani ng palay ng magsasaka,” Mariano said.
Orly Manuntag, spokesperson for the Grain Retailers Confederation of the Philippines and co-founder of Philippine Rice Industry Stakeholders Movement, said lessee farmers tend to have higher production costs compared to other farmers due to the high interest rates added to debts. This contributes to the plight of farmers in the countryside.
“Maraming pamamaraan na isa yun sa nagpapabaon sa mga magsasaka natin sa kanayunan. Maraming nangyayaring ganyan,” Manuntag said. On the other hand, farmers who till their own land can freely choose buyers, a stark difference from farmers who pay for renting farm lots, he said.
3. Local supply and demand
Local supply and demand drive prices, Briones and Manuntag said. Whether palay is sold fresh or dry, or erratic typhoons or severe droughts demolish harvests, or whether irrigation systems succeed or fail in supporting farmers to harvest early or late—these factors drive local competition over palay which in turn triggers prices.
“Depende naman sa lakaran sa kanilang nayon, sa kanilang barangay, at dun sa kanilang probinsya na umiiral na presyo. Usually nagkakaron ‘yan ng bidding. Maraming gustong bumili ng palay niya, tataasan niya ang presyo. So ‘yun yung mga isang nangyari, ayun nag-aagawan sila, maraming nangangailangan, nagpapataasan sila…so ayun ang nagiging factor,” he said.
“Kasi halimbawa, ‘yung presyo ng palay tumaas na sa Nueva Ecija and you’re way out there in Cagayan, sasabihin ng trader, eh di dun ka magbenta. They’ll just call your bluff. So it’s not that straightforward na you’re just setting the price,” Briones explained.
However, some farmers no longer hold their palay. It is already bought by traders even before harvest time, who decides when to release the palay and at what cost.
“Minsan hindi na hawak ng magsasaka ang palay, nasa palay trader na. Palay trader na kasi may puhunan to, malaki ang puhunan niya, may bodega siya. May capacity siya to hold the palay. Kapag nalaman niyang maganda ang presyo sa market, nabili niya ng mas mura, papakawalan niya ngayon yung palay niya,” Manuntag said.
Manila’s rice demand is a major factor in pricing and causes the highs and lows in rice prices, Manuntag said.
4. National Food Authority pricing
While the National Food Authority can only buy palay for buffer stocking, the market still watches NFA prices and regard the agency’s buying price as competition. When the NFA increased palay buying prices at P30 per kilogram, the market followed, Manuntag said.
“Kahit sabihin natin na di naman kayang bilhin ng NFA lahat [ng palay], nagiging factor [ang buying price ng NFA] lalo na sa pricing kapag harvest time,” Manuntag said. “Kapag wala nang harvest at kung mataas ang bili ng NFA, ang gagawin ng trader, mamimili ng mura ‘yan, maglalabas ng pera sa mga kausap niyang magsasaka, mag-aabono na ‘yan.”
“Ang problema, sa dulo ng harvest sila namimili—at napakapili ng NFA,” said Redentor Barcelita, a farmer in Guimba and president of a local farmers’ association. “Hindi sila bumibili sa magsasaka.”
5. World market scenarios
India’s year-long ban on exporting non-basmati rice shook global market supply—and impacted prices in the country. While the Philippines doesn’t import from India, the export break pushed Thailand and Vietnam to increase prices. While global rice prices have stabilized and the government lowered tariffs from 35% to 15%, prices remain high.
The usual mark-up from wholesale to retail or from imports to retail is 20%, according to FFF’s Montemayor. Last year, the agriculture department put the wholesale price of imports at P38/kg, which would have made retail price at P43-P45/kg. But since prices reached P50-60/kg, there are extra costs that go to either wholesalers or retailers.
Exchange rate is also a factor. Even if rice imports are cheaper compared to previous years, the dollar exchange rate is high, according to Marivic Violago-Belen, manager of Joseph Rice Mill.
“Kung bumili ka ng bigas ang dollar ay P56 [ang palitan]. Pero ibebenta mo ng P58 na ‘yung dollar, saan mo kwekwentahin ang bigas mo? Sa P56 o sa P58?” Violago-Belen said. “Syempre ‘di naman one-time ito. May kasunod yan. So sa P58 [mo kukwentahin] para makabili ka ng bago. ‘Yun ang di talaga maintindihan ng gobyerno. Gusto nila kung anong bili mo ng P56, yun din ang ibebenta mo. E pano yung bibilhin mong kapalit?”
That’s not abuse, Violago-Belen said. “Factor ang dollar [sa pagtaas ng presyo ng bigas]. Ang laki ng tinaas e. Kung walang imports ngayon magshu-shoot talaga [ang presyo ng bigas]. Kaya may effect ‘yung imports.”
6. Rice cartel: Can they thrive?
Marcos had lashed out at hoarders, smugglers and alleged rice cartels and blamed them for the sudden spike in rice prices since assuming office in 2022. Some groups believe there are cartels while some believe the current importing environment nipped cartels in the bud.
“Nananatili naman ang posisyon namin na hindi nabuwag ang rice cartel. Paano mo ipapaliwanag yung pagtaas ng presyo kahit mababa namang nakuha yung presyo sa global market?” Rafael Mariano of the Kilusang Manggagawa ng Pilipinas (KMP) told PCIJ. “Kaya ‘yung sinabi ni Sec. Kiko (Francisco Tiu Laurel Jr.) na walang organized cartel, sa’min hindi totoo ‘yun.”
Mariano said cartels can thrive because the government limited its oversight functions with the passage of the Rice Tariffication Law in 2019. This allowed local players to hoard rice and evade inspections since the law disempowered the NFA from checking warehouses and dissolved its trading functions. The law limited government functions and the government can no longer issue warehouse permits. It also lifted the quantitative restrictions on rice imports.
Manuntag said that rice cartels could have thrived before the Rice Tariffication Law was passed in 2019. At the time, the Philippines only imported 805 metric tons and supply could be constricted by a cartel. But after the government allowed any private entity to import rice, cartels can no longer thrive.
“No, wala. Hindi mo kayang magkartel kapag in-open mo ang trade… in-open mo nga ‘yung supply mo sa world market e. Isarado mo ang trade, lalabas ‘yan,” Manuntag said. “Ngayon, kung marami kang pera, kaya mong bumili ng marami. E unlimited ang supply e. Walang limit sa pagi-import. Tumataas ang presyo pero hindi ibig sabihin nun may kartel.”
7. Stable policy environment
While there are good interventions, there are also “wrong interventions,” according to Briones. For one, the price cap and the persistent crackdown on alleged hoarders are discouraging for industry players, he added.
Briones said traders may stock up on palay in preparation for price increases during the lean months, but this also ensures the country has supply during that period.
“But if you expose them to the accusation of hoarding, they (traders) will say, nevermind, baka ma-dyaryo pa ako, baka ma-YouTube pa ako ng mga NBI na yan at Customs, hulihin at ikandado. Ultimately, hindi ako kakasuhan but for all the time and trouble, the administrative paperwork, the reputational effect, you know what? I will sell all my stocks this month. And if the country needs me next month, to hell with them. You’re going to punish me for preparing in anticipation of that problem? It’s not worth the trouble,” Briones said, explaining a mentality among traders in the current environment.
“I’m pretty sure every time you run after a hoarder, you are discouraging stocking activities,” Briones said.
“So if you’re wondering why nobody wants to make big billion pesos investments in modernizing the logistics, the processing of rice… after you see all these efforts of intervention… ‘yung walang stable policy environment—maya’t-maya tatamaan ka ng hoarding, tatamaan ka ng price ceiling—never mind.” — PCIJ.org