Sacrificed

At the end of this useless controversy over rice price capping, our farmers will find themselves at the sacrificial table. As usual.

The business community has now reached a consensus that cutting the tariff on imported rice is a more sustainable way of dealing with the price spikes than the imposition of price caps on retailers. This policy path was first proposed by the Foundation for Economic Freedom and has since been endorsed by the Department of Finance – the agency that was not consulted when the executive order was framed.

At present, tariffs of imported rice is pegged at 35 percent. The economists want this brought down to near-zero.

Bringing down the tariffs will have immediate and palpable effects on rice prices. But it will have two adverse consequences: it will depress farm gate prices for domestic rice and it will deprive government of a sizable source of revenue earmarked for “modernizing” our rice sector. Over time, this will deplete domestic rice production.

The second adverse consequence will still boomerang on our farmers. It will reduce the flow of government support to the sector. Eventually, it will hamper the adoption of higher-yield hybrid varieties dependent on expensive fertilizer inputs.

There will, no doubt, be some political profit to be made from arresting the spike in rice prices. This is what the price caps are all about in the first place: it is meant to conserve the approval ratings of the administration. It is not meant to cause any structural improvement in our agriculture. This is a political game.

Bringing down tariff rates on imported rice will likely be countervailed by rising regional prices for the commodity because of expectation that climate change will eventually tell on each country’s food security. The rice we import tomorrow will be more costly than what we imported yesterday.

At any rate, a dramatic reduction in tariffs will leave our farmers naked before market forces. Many of them might abandon their farms, as many have already done in the past years.

Our rice production is simply unprepared to compete in an unprotected market. For decades, we expected the same farm system and subsistence production technology that provided for the nation when our population was only 20 million to feed all 120 million of us today. That is an impossible mission.

We now live in an age of vertical farming and the widespread use of artificial intelligence in agriculture. Yet our farmers are still drying out their harvest by appropriating national roads – leading to a loss of about 20 percent of the crop. Electric rice driers ensure uniform moisture content. But they are far too expensive for subsistence rice farmers to acquire, especially as energy costs have spiked as well.

Without the high rate of spoilage and spillage, we must have been self-sufficient for years. But we invested in subsidies intended to help a backward agricultural system survive than in reconfiguring our production system.

Rice is a politically-charged commodity in this country. For decades, our agricultural policy has been geared to make rice as affordable as possible – even if this meant compressing farmer incomes. The result is to make rice cultivation a poverty trap. Among rice farmers, income from cultivating the crop is becoming a smaller and smaller share of total family income. The average age of our rice farmers is getting much older. No one wants to be a rice farmer if they can help it.

Yet our agricultural policy has not shifted. We are still aiming to conserve the old subsistence system through free irrigation and fertilizer support. This makes self-sufficiency such an elusive goal.

The rice price caps is simply an extension of the old arrangement that produced unspeakable rural poverty. It does not address the structural problem that burdens the national effort to feed ourselves.

This policy will probably become the final blow that drives our rice farmers to extinction.

Excise taxes

The usual suspects at the Department of Agriculture deny playing a role in crafting this crazy policy of capping the retail price of rice now wreaking havoc in the supply and distribution chains – as the basic law of supply and demand might have forewarned us.

If the economic management team was not consulted on this policy and if the agriculture technocrats did not initiate it, we are left with the last possible suspect: House Speaker Martin Romualdez, a constant presence in every presidential entourage. The Speaker has mysteriously materialized in raids conducted on rice warehouses. Clearly, he sees managing rice prices a strong platform for his political future.

In the raids so far conducted, no hoarding has been established and no hoarders arrested. The convenient bogeyman for the most simplistic diagnosis of our agricultural failure is quickly turning out to be fake.

The other day, the office of Speaker Romualdez announced he would convene a meeting of players in the oil industry in an effort to curb price increases. Oil, like rice, is a politically explosive commodity.

We all know that oil prices are dictated by global supply constraints caused by the effort of Saudi Arabia and Russia to choke production. If the administration decides to adopt the same heavy-handed bureaucratic approach used against rice retailers, we would have an oil crisis in no time.

The only way to bring down oil prices in the near-term is to cut the excise taxes imposed on the imported commodity. But government will lose a reliable source of revenue.