‘Tariffs alone won’t fix the country’s rice woes’ — ADB

By Luisa Maria Jacinta C. Jocson, Senior Reporter

TARIFF SCHEMES like seasonal duties are not enough to stabilize rice supply in the Philippines, the Asian Development Bank (ADB) said, citing the need for structural reforms to better protect farmers and still keep prices affordable.

“Tariffs alone won’t fix the country’s rice woes,” ADB Senior Director for Agriculture, Food, Nature and Rural Development Qingfeng Zhang told BusinessWorld in an e-mail.

“While prices have since eased — dropping from a 24.4% peak to near-zero inflation — local farmers are feeling the strain,” he added.

While the government has deployed several measures to bring down prices of the staple grain, Mr. Zhang said there is a need for systemic changes.

“The government has declared a food emergency, released buffer stocks, imposed price ceilings on imports, and sought stronger trade ties with Vietnam. These steps have helped, but structural fixes are needed,” Mr. Zhang said.

In July last year, rice import tariffs were slashed to 15% from 35% to tame inflation.

The Department of Agriculture (DA) in February also declared a food security emergency on rice, which authorized the National Food Authority to release buffer stocks at subsidized prices.

The department also lowered the maximum suggested retail price (MSRP) of 5% broken imported rice to P49 per kilo from P52 per kilo, starting March 1.

“A smarter import strategy — flexible, responsive, and data-driven — is key,” Mr. Zhang said.

Farmers’ groups have been proposing the possibility of a seasonal tariff, which should be strategically timed to not clash with the height of the harvest season.

Mr. Zhang said this type of tariff is “higher during harvest to protect domestic crops, lower in lean months to stabilize prices.”

“It’s a pragmatic middle path — if well-timed and transparent,” he added.

Seasonal tariffs could be a viable strategy, but this needs to be part of a “broader, integrated policy mix,” he said.

Seasonal tariffs are a kind of variable duty rather than fixed.

“The higher seasonal tariff should be put in place at least a month before the harvest season and then revert to the lower off-season level after harvest,” Federation of Free Farmers National Director Raul Q. Montemayor said.

To implement this kind of tariff, the DA must set a target price for palay (unmilled rice) during the harvest period. For example, this can be set at P24 per kilogram.

“Then they compute how much would be the price of milled rice given that palay is bought at P24 per kilo.  Let’s say this is computed at P45 per kilo (for) milled rice,” Mr. Montemayor said.

“So, the tariff rate should be set such that imported rice plus costs will sell at or near P45 per kilo.”

Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan told BusinessWorld earlier that they are open to adopting a seasonal tariff scheme if there are no operational or legal impediments, as this would help stabilize farmers’ incomes.

The DA this week said it will propose to economic managers a gradual increase in the rice import tariffs by the next harvest.

However, it wants the current 15% tariff to be retained until the end of the second quarter to keep rice prices from rising further.

Mr. Zhang said the end-goal should be to “make rice affordable without undermining those who grow it.”

“In the medium run, it is important for the government to support diversification to higher value crops for the financial viability of farmers,” Mr. Zhang said.

“To balance supply needs and farmer welfare, the government could gradually adjust tariffs, invest in irrigation, storage, R&D, and boost farmer support through credit, insurance, mechanization, and technology.”

He also recommended a cluster farming approach, which if supported by the Agriculture department can “help realize the economy of scale in rice production.”

In April, rice inflation further contracted to 10.9% from the 7.7% decline in March.

Data has shown the average price of a kilo of regular milled rice nationwide declined by 13.3% year on year to P44.45 in April, while well-milled rice dropped by 10.4% to P50.54. Special rice went down by 6.2% to P60.69 per kilo.

However, Mr. Montemayor also noted that retail prices of rice have been going down mainly because of the drop in global prices.

“But the trading margin from the import price up to retail has not changed significantly and is still elevated compared to the P13-15 per kilo margin in the past,” he said.