Agriculture Secretary Francisco P. Tiu Laurel, Jr. on Wednesday projected a gradual easing of rice prices as soon as October as a result of the government decision reducing the tariff on imports.
By his estimate, the full impact of the tariff cut should be felt in January next year. President Ferdinand Marcos, Jr. recently signed Executive Order 62, which cut the tariff on rice to 15 percent from 35 percent, effective 8 July.
The reduction seeks to lower the cost of the staple that significantly contributed to headline inflation given its substantial impact in the consumer price basket. Economic managers estimate that the tariff cut could lead to a decrease of around P5 to P7 per kilo of rice.
“But since demand for food usually spikes in December, we anticipate seeing a more substantial drop in rice prices by January,” Tiu Laurel said.
The DA chief explained the expected decline in rice prices has not yet fully materialized because traders ramped up rice imports in anticipation of a supply shortage caused by El Niño.
Between December 2023 to May 2024, rice imports averaged 422,000 metric tons a month, exceeding consumption by 102,000 tons a month.
This resulted in an excess of approximately 612,000 metric tons of imported rice at the higher 35 percent tariff, enough to cover nearly two months of consumption.
Ahead of the tariff reduction, rice imports fell to around 176,000 metric tons a month in June and July.
“It wasn’t until August that we saw a significant increase in import volumes to 385,000 metric tons,” Tiu Laurel said.
In addition to high import tariffs, the soaring global price of rice compelled traders to purchase palay from local farmers at elevated prices of up to P30 a kilo. With current palay prices now ranging between P23 and P25 a kilo, a similar reduction in rice prices in the market could be forthcoming.
“Given the wet season, some areas are seeing palay being bought at P16 to P17 per kilo. We need to monitor this closely to ensure farmers are not shortchanged,” he said.
Global rice prices remain high due to robust demand from Malaysia and Indonesia, and exacerbated by Thailand and Vietnam’s attempts to push prices higher.
“Fortunately, Myanmar has reduced their prices, which has somewhat eased the pressure on rice prices,” Tiu Laurel said.
With India yet to lift restrictions imposed last year on the export of non-basmati white rice, parboiled rice and broken rice, the DA chief said the prospect for a significant reduction in global rice prices is low.
Additionally, freight costs have begun to decline this month after rising by as much as USD30 per ton in June and July.
As the situation evolves, the Department of Agriculture continues to monitor market conditions to ensure that the benefits of tariff reduction are fully realized and that both consumers and farmers are fairly treated.
