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Going beyond price guides for farm products

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Marvin A. Tort

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I have always been curious of price guides particularly on food products. The government, through various agencies, has long instituted the use of such guides. On occasion, the state even chooses to broadcast or publish suggested retail prices — and try to go after those who unjustifiably breach them.

Price guides are meant to keep profiteering in check. But, I wonder still whether such guides actually help curb manipulation as a whole. State resources are always limited, and implementation of the guide or price monitoring is limited only to the extent that monitors or law enforcers can check on certain markets.

What remains a mystery to me is how suggested retail prices are actually set, and whether such guides are not too detached from reality. Moreover, are they intended to keep things fair not only for buyers of goods but also sellers or producers as well? And, in setting the price guides, who do government agencies consult? Buyers, farmers, and middlemen? I am inclined to believe that the inputs of retailers are relied on heavily, in this case, rather than producers.

Consumer protection is the government’s obvious goal.

After all, from where I sit, it doesn’t seem like price guides promote the interest of producers or farmers. Rising prices is one way to allow them to make a profit, even from smaller volumes, as they adjust to rising costs of production. Thus, keeping prices low or steady in such situations is actually contrary to their interest.

But, in the case of food, keeping produce affordable for all is understandably the state’s priority. However, what should be of equal concern is that most farmers remain poor, landless, and uneducated. And their livelihood is highly dependent on factors other than prices, including good weather, access to land, access to financing, access to market, middlemen as fair buyers, and consumers’ recognition of farmers’ efforts through their willingness to pay more for quality products.

In sum, in the entire equation of local farms producing for consumers and exporters, often the small producers benefit the least. And this, to me, is worrying considering that if farmers cannot profit, they can go under. And if they have nothing to sell, then people have nothing to buy. In such a situation, when there is no supply, then price guides become useless.

When supply is limited, prices of produce obviously escalate.

But, when consumers complain and point out to retailers the state’s price guides published in newspapers, the common reply of market people is this: “bumili ka sa dyaryo” (buy from the newspapers), coupled with “mahal ang kuha namin” or that they are just passing on to consumer the high prices charged by suppliers. And these high prices can be the result of any of the factors aforementioned.

In such a situation, how do price guides benefit us? In a report last week, this paper detailed how the government was setting suggested retail prices (SRPs) for select agricultural products sold in Metro Manila, in response to “consumer concerns.”

The report quoted Agriculture Secretary Emmanuel F. Piñol as telling a news conference that SRPs would initially apply to eight agricultural items and may be imposed on more products like livestock and poultry in the next two months.

“This is going to be applicable only to Metro Manila,” Mr. Piñol told media. “It was agreed that for all other regional markets there will be different standards for SRP given the fact that some commodities may be more available in other markets.” He also said that “the SRP will not be a constant figure. It will be adjusted as we move along,” which is likely every fortnightly.

Trade Secretary Ramon M. Lopez was also quoted as saying that the price guides for canned goods, condiments, batteries, candles and toilet soap may be “necessary during these times… when there seems to be claims from consumers that prices are rising.”

Mr. Piñol, meantime, suggested retails prices for regular-milled rice, imported garlic, white onion, red onion, locally grown garlic, tilapia, galunggong, and bangus or milkfish. Poultry and livestock may be added to the list soon.

According to Mr. Piñol, the government would also monitor the price guides’ effect on farmers and fishermen, “because while we want to protect consumers, we also are mindful of the fact that an SRP may be used by the traders in the market to lower the buying price of farmers and fishermen’s produce.”

And this is my point in being concerned about a process where price “guides” are set by the government based mainly on inputs from retailers. How does the state achieve the delicate balance of protecting both consumers and producers, especially in a situation where imported produce tend to be cheaper, while higher prices on locally produced goods do not necessarily benefit our farmers?

Notice that the SRPs of imported produce like garlic and onion are significantly lower than SRPs of their locally produced counterparts. While this benefits our consumers in general, through the availability of cheap imported food, is this a sustainable “formula” for the long term in relation to food security?

How does this strategy meet the demands of a rising population, growing demand for food, loss of farmlands to real estate development and commercialization, and fluctuations in foreign exchange rate, among others?

Large-scale producers profit through efficiency and productivity arising from economies of scale that help them drive down costs. They get to squeeze bigger margins despite relatively low farmgate prices, allowing them to compete against cheaper imports. Small producers, on the other hand, do not enjoy such benefits — particularly those with small lots and can access only “expensive” financing.

Local farmers, particularly small local producers, are rarely in a position to dictate price. Buyers or consumers do not dictate prices, either. Retailers and middlemen are the most crucial personalities in the pricing process, and the determination of price guides with the state. And these sellers’ motivation is, understandably, profit.

In the last few decades that we have been using price guides particularly for farm produce and food, how effective have they been in fighting off inflation? Have we been effectively minimizing poverty and hunger? Have we improved the plight of our small farmers? How can we further calibrate government strategy to ensure the viability of local farming and to ensure sustainable, long-term food security?

 

Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council

matort@yahoo.com