Rice tariffication: Birth pains force farmers' kids out of school

NUEVA ECIJA, Philippines – The government’s economic team, as well as most experts, were one in saying that liberalizing rice imports is necessary to tame prices of the Filipino staple. Hiccups in the implementation of the rice tariffication law are simply “birth pains.”

Giving birth is an excruciating process, but it can kill too.   

The government’s poverty reduction efforts and educational reforms, which had shown promising numbers, may suffer huge setbacks if the situation does not stabilize soon.

Rappler found that children of some farmers have dropped out of school, while their parents have moved to cities to look for work.

Out of school

Most farmers in Mayantoc, Nueva Ecija, are feeling the pinch of the much-lauded law. Children have started to drop out of school, as farmgate prices of palay have fallen below the production cost of P12.

With a heavy heart, Elvira Gutierrez and her husband Rogelio asked their firstborn to temporarily drop out of school until prices stabilize.

"'Yung panganay namin, hindi naman masyadong matalino, pero masipag. Sabi niya rin na tutulong na muna siya sa tatay niya, tumutulong na lang dito sa bahay, para makapag-aral pa rin 'yung bunso.... Masakit pero gano'n talaga," Gutierrez said with a smile.

(Our firstborn is not very smart, but very hardworking. He said he will help his father by doing the household chores so that his sister can remain in school.... It's painful but that's life.)

"Ang pangarap namin sa kanya makapagtapos.... Pangarap niya maging engineer. Ayaw na ayaw na namin maging gano'n siya (magsasaka) tulad ng papa niya kasi napakahirap," she added. (READ: [ANALYSIS] Plummeting rice prices: How will our rice farmers cope?)

(We wish for him to finish school. He wants to be an engineer. We don't want him to become a farmer like his father because it's very hard.)

Ely Abella, principal of Mayantoc Elementary School, told Rappler that he fears other students may drop out soon as well.

"So far, minimal pa, pero dito kasi sa aming school 90% ng mga bata anak ng magsasaka. Bumaba ang enrollment namin, noong 2018 nasa 182 tapos naging 170 na lang," Abella said.

(So far, the impact is minimal. Around 90% of the kids here are children of farmers. Our enrollment rate went down from 182 in 2018 to 170 in 2019.)

Abella said the students who stopped going to school went to other towns where their fathers worked as farmers. There, they help out by getting rid of pests and doing other light tasks. He has yet to determine if the children have enrolled in other schools.

The government is aiming to keep children in school through the conditional cash transfer program. Latest data of the Department of Social Welfare and Development reveals that some 95% of children go to school at least 85% of the year. 

The cash assistance is withdrawn once a child stops going to school. Gutierrez's family is a beneficiary of the program and may lose some much-needed assistance.

Safety net: Too many holes to patch up?

Lawmakers and government economists alike anticipated the negative impacts of lifting the quantitative restrictions of rice imports on farmers. To support them, the law provided safety nets through the Rice Competitiveness Enhancement Fund (RCEF) worth P10 billion for better farm equipment and seeds. Farmers are also able to avail of the P1-billion credit facility of RCEF. 

The P10 billion is sourced through the collected rice tariffs. So far, tariffs collected have reached P15 billion. The excess collection may be used by the government to support local farmers.

Moreover, the Department of Agriculture has allocated P1.5 billion through the Agricultural Credit Policy Council. Under the program, farmers are able to loan P15,000 payable in 8 years with no interest. 

Rice tariffication does not include cash dole outs as it theoretically defeats the purpose of the law that allows the free market to dictate rice prices.

Meanwhile, the National Food Authority (NFA) was given strict orders by President Rodrigo Duterte to aggressively buy palay directly from local farmers at a high price of P19 per kilo.

While these safeguards look good on paper, reality on the ground paints a different picture.

"Hindi naman namin alam 'yan na mga programa na sinabi mo, wala naman taga-NFA na pumunta dito," said Dominador Melchor, a farmer in Nueva Ecija. (We don't know any of the programs you just told me, no one from the NFA came.)

Moreover, rice cartels seemed to have continued their reign and forced local farmers to sell palay at breakeven or at a loss.

Agriculture Secretary William Dar previously told reporters that they already have a list of those practicing rice stock "management" and will talk to these groups.

When does rice management end and hoarding begin? The line has yet to be drawn.

Numbers

As the government continues to work on saving the agriculture sector, farmers are opting out of it.

Elvira said that she and her husband are looking for jobs. She is already set to be a house help.

She may not be the only one doing so. Preliminary data from the Philippine Statistics Authority (PSA) shows that the percentage of those employed in the agriculture sector has declined, while those in services increased.

Farmers have every reason to leave farming. As of the last week of November 2019, farmgate palay prices sank to P15.55 per kilo, over 22% lower than prices from the same period a year ago. 

Assuming that the production cost is at P12 per kilo, farmers just take home over P3 per kilo of palay sold. In some areas like the Zamboanga Peninsula and Western Visayas, farmgate prices go as low as P10 per kilo, lower than the assumed production cost.

Meanwhile, rice-producing regions like Central Luzon and Calabarzon reported prices as low as P11.

Prevailing prices in rice-producing provinces like Nueva Ecija and Tarlac stood at P19.35 and P15.60, respectively. Elvira said she has never heard of such prices in her locality.

While palay prices have significantly gone down, rice prices have also gone down –  but still not as low as expected.

Socioeconomic Planning Secretary Ernesto Pernia previously told reporters that there would be no need for NFA rice anymore, since commercial rice would come in at the same rate of P27 per kilo.

Rice comprises the biggest chunk in computing for the country's inflation rate. With prices going down, the overall figure has sunk well within desirable range. 

However, when 2019 prices are compared to 2017 rates, these are observed to have merely returned to previous rates. Rice tariffication promised much lower prices.

Local palay prices went down as the Philippines imported a whopping 3 million metric tons of rice, according to estimates of the United States Department of Agriculture-Foreign Agricultural Service.

PhilStar reported that this figure is 58% higher than imports in 2018 and is higher than China's rice requirements.

The Philippines only has a population of over 110 million, while China has around 1.4 billion.

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Fertilizer prices also pinched farmers in 2019.

Abella, who also owns some two hectares of land and farms on top of being a school principal, said they are finding it harder to produce better yields due to rising fertilizer costs.

PSA data showed that urea, ammosul, and ammophos fertilizer prices have risen over 20 consecutive months. Complete fertilizer prices have recently gone down slightly, but registered the highest leap from levels a year ago.

What can be done?

Despite the negative impact of the law, experts are clear: reversing liberalization is far more complicated and dangerous.

Think tank Action for Economic Reform (AER) said in a previous statement that a backpedal would create uncertainty and further shake up the stability of palay prices.

"Rice traders who anticipate a reversal of the law are hoarding rice, depressing farmgate prices to the detriment of Filipino rice farmers. Halting implementation would only play into their hands. To counter this, strong signals must be sent as regards the certainty and consistency of this reform," AER said.

AER recommended that farmers be organized into cooperatives and associations to bond themselves and hopefully directly market their milled rice. Conditional cash transfers must also be implemented as various sectors and government agencies adjust to the new regime. (READ: Gov't should provide 'offsetting compensation' to farmers – PIDS study)

Meanwhile, University of the Philippines School of Economics professor Ramon Clarete recommended that the NFA continue to procure palay at a higher price. As the private sector adjusts to the law, Clarete said the government can temporarily create the market for local farmers.

He also echoed AER's recommendation of cash dole outs, but added that there must be strict monitoring of the disbursements to prevent abuse.

All these recommendations are already being made by the government. So far, not all farmers have been reached. 

As we turn a new decade, will there still be Filipino rice farmers? Or is the pain of competing with cheap rice imports just too much to bear? – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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