Central bank, competition watchdog caution against move to raise prices of farm goods amid rising supply

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THE CENTRAL BANK and the competition watchdog have cautioned against moves to raise prices of agricultural products at a time of improved food supply, saying this could disrupt inflation’s slowdown, faster economic growth and healthy sectoral competition.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said monetary authorities are “concerned” about the potential impact of raising prices of farm goods artificially, noting this could drive up food prices anew after sharp declines in recent weeks. Last week, Agriculture Secretary Emmanuel F. Piñol advised poultry growers to raise chicken farmgate prices by P10 weekly amid increased supply due to imports.

Mr. Guinigundo said this had a “potential inflationary impact,” adding that abundant food supply should be viewed positively.

“It’s not a concern. We are encouraged by it because if you have a lot of food supply, and logistics are in order, then that is positive for inflation,” he said at the sidelines of a forum hosted by the Foreign Correspondents Association of the Philippines yesterday.

The BSP is seeing a rosier economic picture this year, with inflation seen settling at 3.2% this year from 5.2% in 2018. Prices will be “manageable” and within the 2-4% target in 2019 as global oil prices decline, food supply normalizes, and the peso stabilizes.

Scarce food supply, particularly rice, drove up consumer prices for most of 2018 to hit a nine-year peak of 6.7% before finally slowing since November.

On the other hand, Mr. Guinigundo said he is confident that the Philippine economy will pick up steam to hit the government’s 7-8% growth target.

“Inflation is down, consumption expenditure is expected to be more robust than in 2018. Investments will also be encouraged by the fact that you have a good price stability picture. Government spending continues to be strong, particularly on infrastructure and human capital development,” the central bank official said.

“I think at least seven percent is doable in 2019.”

The economy grew by 6.3% from January-September last year, versus an already slashed growth goal of 6.5-6.9%. Mr. Guinigundo said he does not expect the delayed passage of the 2019 budget to pull down growth significantly, while election-related spending should give a one-time boost.

Citing data, the 2016 elections added 0.3% to economic growth in 2016. The BSP official, however, said the midterm polls will likely have a lower impact as it involves smaller operations.

Mr. Guinigundo also said that the BSP will keep inflation on a “very tight leash,” which in turn should prompt greater household spending to perk up domestic activity.

A global economic slowdown would also keep prices at bay, even as upside risks to prices persist in the form of a faster-than-expected rate hikes abroad as well as higher domestic power rates and proposed increase in taxes on alcoholic drinks.

Market economists have been more bullish towards 2019 prospects, with most analysts pencilling in a faster growth rate with inflation concerns now out of the way.

On the other hand, the Philippine Competition Commission (PCC) said it could investigate reports farm producers could hike prices in unison.

“We are considering,” Orlando P. Polinar, director of the Competition Enforcement Office told reporters when asked if the watchdog will look into the reported move.

“Any conduct that is inconsistent with the PCA (Philippine Competition Act of 2015) will be investigated,” he said in a press briefing earlier in the day.

“As enforcement office, our main concern is really to look at what’s the problem and what’s causing it.”

Referring to his meeting with poultry farmers, Mr. Piñol said: “I left them with the appeal that once and for all, they should agree among themselves to protect themselves… So my suggestion a while ago is that they should agree to increase the farmgate price by at least P10 every week until such time that it hits a level where they are not losing money.”

Mr. Polinar said the PCA has no jurisdiction over government offices, even as he said that anyone who participates in or guides a cartel is not exempt from prosecution.

“For government offices, we have advocacy work. We can make suggestions and comments on policies that will ensure [policies will] be consistent with robust and healthy competition in the market,” he added.

The PCC last week reminded the DA that its proposal was anticompetitive and illegal while encouraging producers to independently adjust their own prices or output.

At the same time, Mr. Polinar explained that the PCA is designed to aid marginalized sectors.

“… [T]he PCA has bias in favor of the smaller players, especially the marginalized sectors, so let’s see,” the PCC official said.

“We are not ready at this point to say whoever is causing it or what exactly is the nature of the problem of the market…”

Poultry raisers welcomed any investigation, challenging the PCC to look into the discrepancy between farmgate and retail chicken prices.

“In any case we welcome any investigation. We also would want — since the PCC is also interested in agriculture — that they look into the retail establishments. We are suffering, and yet in the retail prices are going up,” United Broilers Raisers Association President Elias Jose M. Inciong said in a telephone interview on Thursday.

He also defended the industry, saying: “If we are a cartel, we will not be losing money and if we are a cartel, we will not be coordinating with government.”

“What happened was there was just an agreement to inform what was the size of the chicken inventory. You cannot fix prices when the other poultry producers are not members,” he added.

AS of Jan. 8, the volume of imported chicken increased by 50 million kilograms (kg) from a year earlier.

The PCC said it will review the volume of imported chicken as it might exceed the domestic market’s absorptive capacity. — Melissa Luz T. Lopez and Janina C. Lim