HOW MUCH SHOULD THE RICE FARMERS MAKE? HOW MUCH DO RICE TRADERS MAKE?

In one study of the rice industry, it was noted that the middlemen from farm to market in the PH contributed significantly more to the retail price of rice than in other countries.

This begs the question: How much is enough for all the parties concerned?

Where is the declaration of Senator Cynthia Villar that P5/kilo is "enough for the farmers" really coming from?

Is it really concern for the consumers or is it simply a reflection of the typical rice trader's mentality?

For the average consumer, it is a bit hard to appreciate what the cost of palay really means as compared to milled rice so, let’s do some computations.

On the side of the farmers, let’s see how this works out (roughly). At an average production cost of P12.42 plus the P5 margin of Senator Villar, this would make the “fair” farmgate price of palay P17.42/kilo.

A kilo of palay will yield about .675 grams of rice. A kilo of rice requires 1.48 kilos of palay. At a recovery rate of 1.48 kilos of palay to get 1 kilo of rice this comes out to P25.80/kilo of farmgate rice.

Thus @ P5 profit/kilo of palay, the farmer’s profit per kilo of milled rice is approximately P7.40 IF the farmgate palay price is P17.40. Even less it is is only P17.

His production cost of P12.42/K of palay (18.40/K of rice) covers the effort of approximately 120 days of land preparation.planting, irrigating, fertilizing, monitoring and application of insecticide, harvesting and drying.

It does not cover the considerable risk and inevitability of calamities like typhoon & drought by which an entire crop can be destroyed at the most extreme or only partially salvageable and of low value at the most favorable.

In fact, it is remarkable that while there are quite enough statistics as to everything about rice production, there is practically NO INFORMATION available as to how the inevitable calamities actually affect the farmer.

Figures that might appear reasonable, such as profit and the difference between a well-managed farm with modern practices and a poorly managed one are highly misleading in terms of actual human experience.

Can you imagine working for a company where you although could earn a reasonable bonus twice a year, you could also end up earning less (in case of a drop in palay prices) or end up not being paid for half a year or even a full year if you are unlucky?

The reality is that regardless of whether one earns P40K or 180K/hectare every 4-6 months, a calamity that wipes out P50K worth of INVESTMENT per hectare - the profits from which would be needed for living expenses for the next 4 months as well as to cover the cost of replanting - would virtually wipe out whatever profit might have been saved for at least 1 or two successful cropping seasons, if ever anything had been saved at all. Much worse if the calamities come in succession.

For all this effort and risk, most farmers are bound to a profit of what amounts to P7.40/kilo of milled rice IF they can get a farmgate price of P17.40.

Contract farming eliminates the burden somewhat as farmers would not need to worry about farming inputs for planting BUT they also will probably not get the maximum (although they may at least be assured of a minimum) price they could have gotten.

Thus, the income prospect for most farmers is pegged at P7.40/k of rice or less.

In the course of a discussion, a rice trader friend claimed that the approximate landed cost of imported rice is about P26. from which traders find it "only fair" to expect or demand a 35% profit for the effort of importing and the “risk" of putting up the money for it.

This comes out to about P9/kilo net profit for a P35 wholesale price. If the traders do the retailing themselves, they stand to earn at least P5 to P10 or even P15+ more depending on where and how it is sold.

The question is, if rice traders think that they are entitled to earn a P9-P25+ profit/kilo of milled imported rice for 2 weeks effort & perhaps up to 6 months of shipping/storage/distribution time, with minimal risk from calamities and price fluctuations for their investment, why does the lady Senator who is also the #2 rice importer think P5/kilo of palay (P7.40 milled) is almost more than fair for the much poorer farmers? They, who must work so many times and longer hours harder and face exponentially greater risk from calamities as well as price manipulations of the traders for THEIR MUCH HARDER EARNED MONEY?

While importing rice before the RTL was admittedly a rather complicated privilege reserved for a “blessed” few, the RTL made things much simpler for rice traders.

The swift issuance of a remarkable IRR which was the last document signed by the outgoing DA Secretary immediately allowed ALL of them to freely get their import papers processed after about two weeks or less of EFFORT, which they certainly did quite enthusiastically.

Was it enabled by the huge profits they made from the artificial crisis they created that caused rice prices to soar last season?

It also doesn’t seem like any of them considered importing that much rice too much of a risk, despite the rather large capital required. Why would they when they basically control ALL of the wholesale market and much of the retail as well. There is absolutely no question that they would be able to dispose of any quantity of rice sooner or later, whether locally acquired or imported, as it was in the beginning, now and ever shall be, come what may.

And while I have no means to dispute the claim of P26 landed cost, (an issue for another day) it seems rather coincidentally about the same as the milled cost of local palay if bought at P17.40 (P25.80) :) In that case, the question begs: Why then would rice traders be falling all over themselves to buy huge quantities of imported rice which would cost about the same as local rice, particularly just before the harvest?

Was it in fact in connivance with FORMER DA and NFA officials that it also just so happened that the NFA could no longer even buy rice from the farmers because they had also imported so much rice that their warehouses were full and could not accommodate any more even if they still had the funds to buy them? And that they were not disposing of this rice which they were supposed to reserve only for calamities?

And was it unexpected that the resulting situation led to an UNPRECEDENTED 50%+ drop in the price of palay to as low as P7-P8/kilo in some places, something which the lady Senator scoffed at even as the farmers were bewailing their fate?

Was it simply a coincidence that after an artificial rice crisis, the enactment of a law supposedly for the benefit of the rice industry sponsored by the #2 trader and a hastily issued IRR that the traders would suddenly only agree to buy palay at P8/kilo after having just imported milled rice for MORE THAN DOUBLE that?

P8/kilo palay would result in a price of P12/k rice when milled. So how much would they even sell it for? P16? P20? Or even P30 - a P150% mark-up? Would this not be a clear case of price manipulation, profiteering and even economic sabotage?

Thankfully, the problem has been forcefully addressed by the none-too-soon action of President Duterte and the new DA Secretary, WIlliam Dar who has ordered the current stocks of NFA rice to be immediately sold at P27 from P32 but has also increased the buying price of palay to P19 from P17. This, in spite of the fact that according to the RTL, the NFA was no longer supposed to intervene in buying or selling except to stock up for calamities. Would that it can be implemented properly.

At a single stroke, this surprisingly bold, brilliant and unprecedented move would surely disrupt the heretofore untouchable, much too brazen machinations of the rice cartels by affecting the normal movement of their huge inventory of imported rice.

It would even oblige them to temper their margins to at least a bit closer to what Senator Villar thinks is good enough for the farmers. It would also raise doubts in their minds about the wisdom of importing rice which would not be able to compete with the NFA price given the huge disparity.

Given that the orders are for the NFA to buy ALL the rice it can, the traders would not even be able to buy rice locally unless they paid as much as the NFA even as they would also not be able to compete with the NFA’s retail price.

Curiously enough, not a single peep or objection has been heard from anyone despite the fact that the NFA is technically no longer supposed to do that. Somehow it seems that some people have been given rope to hang themselves with and they so willingly obliged :) :) :)

And yet, that is only the first bold step in rejuvenating the moribund rice industry that was almost killed by those with nothing but their own interests in mind. More unprecedented action must be taken including a change of paradigm with the rules being reset and redefined with the welfare of the farmers & the country being the priority instead of being subservient to a well-entrenched few fro more than half a century. The rice cartels/traders are rich enough to survive a change & temporary diminution of income which they have actually never experienced for so many decades.

While the DA is now busy trying to contain the African Swine Flu issue, hopefully DA Secretary Dar will be able to attend to what has to be done for the rice industry sooner than later. May he be steadfast enough to see it through. That is, if the cartels don’t get to him first. Still, at least there seems to be hope.

Let us support DA Secretary Dar. He will need it in the days to come. This is but the first round.

(Image of Cynthia Villar from ikot.ph) (hahaha!)
(Image of DA Sec. WIlliam Dar from pna.gov.ph)