Grains Gordian knot

The turmoil in the rice market may force exporting nations to cut back if not altogether end exports, which makes the deal with Vietnam all the more valuable.

While the nation is betting the rice supply will normalize by the end of this month when the harvest season begins, prices are expected to remain elevated as global supplies remain tight. Profiteers are expected to exploit the situation by keeping grain prices high despite an ample supply.

The government has imposed a two-band ceiling of P41 a kilo for ordinary rice and P45 for the well-milled variety, which is a costly measure since subsidies have to be given to retailers who are selling at a loss.

Since the retailers are being subsidized, the farmers who are suffering from low farmgate prices due to the price cap are seeking similar government assistance.

The authorities have already taken the right step by raiding huge warehouses in Bulacan and other provinces where piles of rice sacks touch the roof.

In these storage facilities, empty sacks on which were printed local labels were found, raising suspicions that imported grains were being repacked since local rice fetches higher prices.

Since unscrupulous practices were suspected, the warehouses were padlocked and the traders were ordered to produce the documents to prove the grains were not being hoarded.

Despite promises of further raids on suspected hoarders, nothing more has been heard about the raided warehouses nor were the huge grain inventories confiscated.

Meanwhile, the government is doing its best through bilateral agreements such as the recent deal with Vietnam to keep the supply line open that was signed on the sidelines of the 43rd ASEAN Summit.

Vietnam was the world’s third-largest rice exporter last year after India and Thailand, while the Philippines was the second-largest importer next to China.

President Ferdinand Marcos Jr., who is also the agriculture secretary, said the deal assures the Philippines of a steady supply of rice from Vietnam for the next five years.

Marcos was forced to impose the rice price cap after the price per kilo of the grain rocketed to P60 despite the opening up of importation through the rice tarrification law.

The law’s aim was to bring down prices by removing the importation monopoly of the state-owned National Food Authority.

The challenge remains on prices since pressure has mounted after global rice prices surged to 15-year highs when India, which accounts for more than 40 percent of global trade, halted rice exports in July in a bid to calm domestic prices.

Agricultural experts said the price of the staple grain in the world market will remain high in the wake of the Covid pandemic, the war in Ukraine, and the impact of the El Niño weather phenomenon on production.

The turmoil in the rice market may force exporting nations to cut back if not altogether end exports, which makes the deal with Vietnam all the more valuable since about 90 percent of the Philippines’ imports come from that country.

The Food and Agriculture Organization has said the expected recovery of the rice trade in 2024 would be “modest” if the India restrictions are protracted and El Niño disrupts production in other Asian exporting nations.

Price manipulation by local cartels causes a chain reaction in the world market since the Philippines is a major market for the grain.

With precise steps to balance the interests of every stakeholder, it follows that the price cap may influence the lowering of rice prices in the international market.

The scheme comes at a price for the government since it entails subsidies that are costly and go against free market norms.

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Credit belongs to: tribune.net.ph