During palay harvest season, Rose* spends the day on the phone messaging farmers on the status of harvests. The transaction is borne of routine harking three decades back: Rose’s cooperative bridges more than 2,000 rice and corn farmers and the numerous traders she had established links with.
Rice grains from the more than 1,000 farmers growing 500 hectares of palay in Rose’s town are transported to other towns in Cagayan Valley and neighboring Isabela. A bulk travels to as far south as Bulacan, where it enters the inter-city rice milling complex in Bocaue, stored in warehouses of wholesalers, and transported to thousands of retailers in Metro Manila to feed the 13.4 million population here.
Cagayan is among the top five rice-growing provinces in the country, producing 1.1 million metric tons of palay in 2023, according to figures from the Philippine Statistics Authority.
Given the province’s status as a prime growing region, harvesting season carries an age-old pricing dilemma, a sentiment that reverberates across farming communities in the country.
Our farmers dread the harvesting season because we have to deal with pricing—again.
Rose*, leader of a farm cooperative in luzon
“Our farmers dread the harvesting season because we have to deal with pricing—again,” Rose tells the Philippine Center for Investigative Journalism. “It’s the usual problem. Our farmers ask us to intervene and come up with a set price from the beginning that lasts until the end of harvesting season, but we can’t, we don’t have that influence… we’re only a cooperative.”
Local palay production gained a record high of 20.06 million metric tons in 2023, 1.53% higher than 2022 outputs, according to the Department of Agriculture (DA). But the year closed with prices skyrocketing to P49 per kilogram for regular milled rice and P54.68/kg for well-milled rice.
Economic experts and industry leaders attribute the shortage to simple supply and demand—if supply is unable to meet demand for the good, prices rise. However, the situation was exacerbated by knee-jerk reactions from the government, such as the price ceiling, which destabilized the market.
The sheer complexity of the Philippine rice value chain and the numerous players in the market worsen the difficulty of pinpointing pricing triggers and setters. The Philippine rice value chain is linear on paper: farmers sell their rice grains to a cooperative or directly to a trader, which then sends it to millers and wholesalers, then to retailers.
On the ground, it’s a different story.
The PCIJ traced how prices were set in the market during the rice shortage season last year. It found that farmgate prices increased by at least 80% to as high as 190% from farmgate to retail.
Experts say the politics attached to the sector weakened measures on significant long-term changes, industrialization, and growth in the industry, which led to failures in stabilizing rice prices despite consistent rice production and the implementation of rice tariffication rules adopted to ease deficiency.
PRICE CEILING
The DA was confident in May that supply was stable. Around 1.4 million metric tons of imported rice arrived and local outputs in the first semester were adequate to plow through the lean months of July to September, the department said.
Rice prices ranged from P34-P42/kg for regular milled rice and P40-P49/kg for local premium rice at the time.
The Philippines heavily imported rice from Vietnam. But after India put on the brakes on exports on July 20, local companies imported 409,000 tons in August, 75% more than July, at prices 22% higher—around $654 per ton.
Officials explained that the rapid acceleration in local rice inflation triggered further price increases. In the first week of September, prices surged to P48.14/kg, up from P41.23/kg in the first week of August.
President Ferdinand Marcos Jr., then agriculture secretary, blamed hoarders and smugglers for manipulating prices, and implemented a price cap of P41/kg for regular milled rice and P45/kg for its well-milled version on September 5.
Marcos lifted the price ceiling a month later. The department has not identified the cause of the surge and warned that prices would remain high until the first quarter of 2024.
Government data indicated that the national price average did not decrease at the onset of the price ceiling. Only around 20 provinces brought down retail prices to P38-P43/kg in the second phase of September and six of these provinces had low retail prices to begin with.
By mid-October, almost all the provinces bumped down retail price, which ranged from P38/kg to P48/kg. However, 14 provinces maintained retail prices at P50-P59/kg for regular milled rice.
The price ceiling earned mixed impacts for farmers in Cagayan, Rose said.
Farmers who purchased rice in the market for their own consumption ahead of the harvest season were able to buy retail at better prices. But farmers who depended on price surges during early harvesting season could no longer sell their grains at competitive costs.
“If farmers have not harvested yet, the country can draw on imports, but import prices have increased so we’re depending on farmers who harvest early,” agriculture policy expert Roehl Briones, Senior Research Fellow from the Philippine Institute for Development Studies, told PCIJ. “But after the price ceiling, farmers said, ‘Sayang’ (It’s a pity) – they can no longer sell palay at the prices traders offered them last week,” he said.
FARMGATE PRICES
During the first cropping season in April to May 2023, Rose said the harvest was good and prices were competitive. It’s an easy season for farming — the sun dries up the palay within a day or two.
A hectare usually yields 120 bags of palay and farmers who harvested early, roughly covering 10 hectares, were able to sell farmgate prices—the price set by farmers based on the first transaction— at P23-P27/kg. Once the peak harvest season kicks in and hundreds of hectares are ripe for the picking, palay prices decrease to P18-P20/kg in Rose’s town.
The second cropping season, from October to December and sometimes extending until January, had been a challenging period. The previous months saw sporadic rain and fresh palay needed at least a week to dry. Due to the shortage and the erratic, dreary weather, farmers were forced to sell fresh grains at a much lower price of P15-P16/kg.
In 2016, input for rice production was around P12-P13/kg, but fertilizer costs went up after the COVID-19 pandemic and palay prices depend on the seed variety and farming procedure, whether it’s rainfed or irrigated.
Rose said a “fair” amount for farmers should be above P20/kg, especially during the second cropping season. This would allow local producers to recover the input prices and gain earnings. Data from the PSA indicated that annual average farmgate prices for dry palay in 2023 stood at P19.88/kg, lower than what would be adequate for Rose and the farmers in Cagayan.
The cooperative adds 50 cents per kilogram to cover expenses for the pick-up and temporary storage. The cooperative uses the earnings to provide loans for seeds and fertilizers during the pre-planting seasons.
Farmgate prices are not standard across the Philippines but costs are higher in top rice-growing provinces. Nueva Ecija, for example, had the highest farmgate price in the country with P 27/kg during the tail end of the harvesting season last month.
Farmgate prices are not standard across the Philippines but costs are higher in top rice-growing provinces. Nueva Ecija, for example, had the highest farmgate price in the country with P 27/kg during the tailend of the harvesting season last month.
“Notionally, you might think that the biggest rice-producing region, which is Central Luzon centered on Nueva Ecija, might be seen as the bellwether or reference price—this is not to deny that ultimately, prices turn out to be integrated across the country,” Briones said.
“But because of difficulties in easily connecting palay from that area to others, it’s not a useful reference. Prices are determined based on localized supply and demand conditions,” he explained.
Rose pointed out, however, that prices are not determined by input prices, but by the destination of the palay.
“The expenses are not based on inputs—no, that’s not the basis for prices,” Rose said. “The price is based on where our buyers are. We don’t incur losses during the summer planting season, but during the wet season, now, our farmers don’t earn anything.”
This means that Cagayan’s farmgate prices will increase or decrease based on prices in Isabela and Bulacan. “If the farmgate price is higher, then that’s great,” Rose said. “But if it’s lower, we adjust to that price. If we don’t change our price, we risk losing buyers.”
Government data do not reflect this. Farmgate prices in Cagayan last year were at P 20.43/kg, lower than Isabela’s P21.65/kg and Bulacan’s P 21.21/kg. This means that based on aggregated annual data, Cagayan farmers should have earned when they sold dry palay to Isabela and Bulacan traders.
A look at farmgate prices published in 2021 contains disaggregated data on weekly farmgate prices for each province in the country. While sparse, it offered a preview of pricing fluctuations and a glimpse of Rose’s situation.
According to figures from the fourth week of January, dry palay in Cagayan cost P18.44/kg on average while dry palay from Isabela was worth P19.38/kg. Bulacan farmgate price at the time was a low P13.90/kg—the lowest farmgate across the country that year.
This means that if Rose’s cooperative sold to traders from Isabela that week, farmers would have earned P22 for every sack of dry palay. But if Rose’s cooperative sent the palay to Bulacan—roughly 80% of the town’s palay yields are bought by traders there—then each sack would have incurred at least P227 in losses.
The figures, however, are based on estimates from publicly available data. The actual price could vary depending on arrangements and transactions between producers and buyers, and on the weeks the transactions took place as farmgate prices change every week in general.
TRADERS, MILLERS
Once palay leaves farm gates, the value chain process becomes complicated due to the sheer number and variety in types of traders and millers, Briones said.
“The direct producers of palay will tend to sell directly or indirectly to the millers and the millers connect to them either directly or indirectly to wholesalers,” he explained. “Then we go through multiple layers but the PSA tends to collapse the process by looking at one of the more established ones.”
On the millers' side, there are small, barangay-level mills for big consolidators or wholesalers. While some farmers’ cooperatives are also millers, most large wholesalers are also millers. Some institutional buyers contract farmers to plant a specific seed variety and oversee the milling, wholesale, and retail.
“Now, here’s the controversial part… There’s the impression that there are just a few traders, but actually, there are many, many of these palay traders… covering those working for companies to independent traders,” Briones said. “Similarly with millers, some are very large, some have a fairly modest size, there are several still very old… ‘yung mga kiskisan sa mga barangay, small gilingan… they still persist.”
Rose’s cooperative tries to increase rice prices by doing the milling. The cooperative manages a small machine from the government’s post-harvesting modernization grant, which can only process 10 sacks of palay in a day to produce Rc18, a long grain from a seed variety that yields an average of 5.1 tons per hectare and has a 65.34% milling recovery rate.
As the machine is not efficient during peak harvesting season, the cooperative sometimes opts for milling services in the next town but the milling price is high at P5/kg. Milling price also varies across the country. For example, milling is low at P1-P1.50/kg in Cebu.
The price difference from rice growers to wholesale is wide at 40-44%, according to Hongjia Grain Machinery, a private milling service company. And the difference between retail to wholesale is a small 6-8%, showing that a bulk of the prices are added in the milling stage.
“It covers processing (such as processing costs and quantity adjustments for recycling rice milling) and assembly costs from rice farmers to millers,” the company said in its analysis of the Philippine rice market.
Efficiency in milling operations is also subject to individual company’s machines and efficiency rates for processing different types of grains, which makes it difficult to place a specific cap on how much prices are added at this stage. Further, milling processes and prices are not widely documented and scrutinized.
Data also show at least 130% increase from farmgate price to wholesale last year starting in August. The wholesale price further increased by at least 25% in retail.
Wholesale prices started increasing in August and have not decreased since then. In contrast, farmgate and retail prices showed significant decreases after the imposition of the price ceiling. This means the price cap may have impacted more farmers and retailers rather than wholesalers. Further, Bulacan and Tarlac provinces have no recorded wholesale price for 2023.
In Cagayan, last year’s lean months saw a sack of milled rice costing P2,500-P2,700 in Rose’s town, 157-191% higher than the P925 farmgate price per sack. “There’s no shortage now because it's peak harvesting season, but retail prices are still high, very high,” Rose said.
BAROMETER OF POLITICAL SUCCESS
The government has rolled out a range of programs to boost yields and support farmers such as post-harvest modernization grants, farmer-targeted subsidies for seedlings and fertilizers, promoted crop diversification, and funded research on rice seedlings that can withstand extreme weather conditions.
While the country’s rice value chain is a “picture of chaos and decentralization,” Briones said that it is highly competitive. “I would hesitate to pinpoint a specific determinant of what drives local rice prices; the sheer disorganization is making it difficult to pinpoint the source,” Briones said.
Underlying forces persist, such as the 20-30% increase in world rice prices, rising global costs for fertilizer since 2021, and climate change impacts on agricultural production. There remain bottlenecks in terms of transportation, fuel costs, and a large issue surrounding irrigation and farmland access to water.
Gaps continue to persist due to a lack of standardization in the market. While there are existing standards and grading systems set for fiber and tobacco, there’s still none in the rice industry—or at least it was not implemented when it was set by the National Food Administration, Briones said.
This would have provided a benchmark for rice costs, Briones said, as the market can determine prices based on the quality of the grains. What’s in place, however, is a common practice of mixing rice varieties in the milling stage.
I would hesitate to pinpoint a specific determinant of what drives local rice prices; the sheer disorganization is making it difficult to pinpoint the source
Roehl Briones, the Philippine Institute for Development Studies
“These are the types of interventions that I believe even the private sector will welcome because even among themselves, they are confused,” Briones explained. “This would be a great service the government can offer … they’ll think, “Oh this is what we mean by palay grade 6 or regular milled rice Grade 1’.”
Briones had also recommended a slew of interventions, including providing support for millers and traders and incorporating them in the post-harvest modernization plan, a better buffer stocking program, and province-level appraisals. Another important intervention, he said, could be creating platforms for transparent pricing such as wholesale markets or digital rice trading platforms.
“That’s a modern government and you can let these platforms with mandated guides and standards that are transparent play out of market forces. This gives farmers, and producers the leeway to choose buyers if they are not satisfied with offers,” he said. “For 90% of the market, maganda talaga is systematic.”
And the most important, he said, is to avoid equating rice prices with political success. “Rice has been treated as a political commodity. It’s a barometer of success as a politician, as a leader,” Briones said. But recent electoral showings have proven otherwise, he said. — PCIJ.org
Personal name and the name of the cooperative were withheld upon request.
PCIJ Executive Director Carmela Fonbuena supervised this reporting project supported by the Internews Initiative for Media Freedom. Resident Editor TJ Burgonio was the copyeditor.