MANILA, Philippines – During the 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 in Cagayan are transported to other towns in the Cagayan Valley province as well as to towns in neighboring Isabela province. A bulk travels to as far south as Bulacan, where it enters the inter-city rice milling complex in Bocaue town, is 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 (PSA). Amid 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 tells the Philippine Center for Investigative Journalism in Tagalog. “It’s the usual problem. Our farmers ask us to intervene and come up with a set price, 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 last year also saw prices skyrocket to P48.50 a kilo for regular milled rice and P51.99 for well-milled rice. 



Analysts said this could have been prompted by news of global shortage after Vietnam and India pulled the brakes on exports and the rapid acceleration in local rice inflation.

Palay production has seen consistent growth in the last decade. 

The agriculture department said rice supply was enough for last year’s lean months, from July to September. Around 1.4 million metric tons of imported rice arrived by May following good local rice outputs in the first semester of the year. As of May, rice prices ranged from P34 to P42 a kilo for regular milled rice and P40 to 49 for local premium rice.

But prices peaked to P42-P55 a kilo for regular milled rice, and to P47-P55 a kilo for well-milled rice in September.   

President Ferdinand Marcos Jr., then agriculture secretary in a concurrent capacity, blamed “opportunistic traders’’ for the illegal price manipulation. He next ordered a price cap of P41 a kilo for regular milled rice and P45 for its well-milled version. 

The DA has not identified the cause of the surge and warned that prices would remain high in the first quarter of the year.

The price ceiling had a mixed impact on farmers, Rose said. Farmers who were waiting for harvests were able to buy rice for their own consumption at better prices.  But farmers who depended on price surges during early harvests could no longer sell their grains at competitive prices. 

“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 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 added. 

Across the spectrum, economic experts and industry leaders attribute the rice shortage in August and September last year to simple supply and demand—if supply is unable to meet demand for the good, prices rise. In those two months, the total volume of rice was way short of the 60 to 90-day buffer stock. 

However, the situation was exacerbated by knee-jerk reactions from the government, such as the price ceiling, which analysts said 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 prices increased by at least 80% to as much as 157% from farmgate to retail. 

Experts say the politics attached to the sector weakens 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.




 Setting farmgate prices 


During the first cropping season in April to May 2023, Rose said the harvest was good and prices were competitive. It was an easy season for farming: the sun dried 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 at P23 to P27 a kilo at farmgate prices—the price set by farmers based on the first transaction. Once the peak harvest season kicks in and hundreds of hectares are ripe for the picking, palay prices decrease to P18 to 20 a kilo in Rose’s town.

The second cropping season, from October to December and sometimes to January, was a challenging period. The previous months saw sporadic rain and fresh palay needed at least a week to dry. Due to the supposed rice shortage and the erratic weather, farmers were forced to sell fresh grains straight at a much lower price of P15 to P16 a kilo.

In 2016, input for rice production was around P12 to P13 a kilo, 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 a kilo, especially during the second cropping season. This would allow local producers to recover the input prices and gain earnings. 

The cooperative adds 50 cents per kilo to cover 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 P27 a kilo 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 explained.

“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.”

Rose agreed, but prices are determined by the destination of the palay, not the source.

“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 P18-P20/k farmgate price last year 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.”

A look at farmgate prices, however, showed an interesting trend. Government data shows that Isabela farmgate prices are a little higher than Cagayan; if Rose’s traders come from Isabela, the cost of palay rises to P21 per kilo or P1,075 per sack of 50 kilos, including the mark-up the cooperative added.

But if Rose’s cooperative sells to Bulacan, the price drops since Bulacan has the lowest farmgate price in the country. In 2022, farmgate prices in Bulacan were only around P13/k. This would mean that Rose is selling at a loss of at least 27.7-35% for Bulacan-bound palay—and roughly 80% of the town’s palay yields are bought by Bulacan traders.

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. Farmgate prices, in general, change every week.


 What drives prices? Milling a key factor  


The cooperative of Rose*  tries to increase rice prices by doing their 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 at P5 a kilo, much higher than the average P1-P1.50/k.

Once palay leaves farm gates, the value chain process becomes complicated due to the sheer number and variety in types of traders and millers, said Roehl Briones, Senior Research Fellow from the Philippine Institute for Development Studies.   

“The direct producers of palay will sell or 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(Philippine Statistics Authority) tends to collapse the process by looking at one of the more established ones.” 

On the millers’ side, there are small, barangay-level mills to 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.” 

The price difference between rice growers and wholesalers is wide at 40% to 44%, according to Hongjia Grain Machinery, a private milling service company. And the difference between retail and wholesale is a small 6% to 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.

In Cagayan, last year’s lean months saw a sack of milled rice rising to P2,500 to 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 despite the dysfunction. “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.

“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. END


Editor’s Note: *Personal name and the name of the cooperative were withheld upon request.

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