Agriculture Reference
In-Depth Information
respond to emergencies, especially in areas that become isolated and unreach-
able by normal means after a calamity. It distributes rice stocks withdrawn from
the nearest NFA warehouse or canned foods purchased in the open market. The
Department of Social Welfare Development, on the other hand, has its own
mechanism to assist calamity-affected households through the distribution of
food items, including rice purchased from the NFA, and nonfood items as well.
This duplication suggests that there is a coordination issue, as three different
public agencies are trying to achieve the same policy objective, which, in all
likelihood, is expensive and inefficient.
STRATEGIC RICE RESERVE
. The volume of the government's stock or
strategic rice reserve (about 650,000 tons) is based on the assumption that pri-
vate traders and households have zero stocks, and the government would need
at least 30 days to replenish stocks from imports. To examine the consistency
of the policy, I analyze the government's historical strategic rice reserve level,
starting in 1985/86. Four important results emerge from the analysis presented
in Table 7.3. First, the public stock, dominated by excessive imports, has often
been high, particularly in the late 1990s, with the highest level reached in 1999.
Second, by maintaining excessive stocks, NFA essentially forces itself to un-
load as much rice as possible during the three lean months. This practice pushes
prices down and discourages private stock-holding, which is reflected by the
fact that whenever NFA held a large stock, both household and private stocks
have been lower. Third, NFA distributed only half of its stocks during the peak
distribution months, which meant incurring additional storage costs on the other
half of the stocks, amounting to about 300,000 tons. Finally, data also show that
increasing NFA's strategic rice reserve through procurement during the main
harvest season entails at least 9 months of storage before peak demand occurs.
The high carrying and procurement costs make this approach an expensive
stockpiling operation.
Public Distribution
The central objective of the policy of public distribution of rice is to stabilize
prices and guarantee an affordable price to poor consumers. However, available
economic studies indicate that prices have been unstable in many years; leak-
ages have been as high as 50 percent (Balisacan 1995; Subbarao, Ahmed, and
Teklu 1996), and that consumers would have been better off had prices been de-
termined by market forces (Clarete et al. 1992). Analyzing price data for 1986-
96, Clarete (1999) concluded that farm prices of
palay
would have been lower
by 8 percent if the wholesale prices of rice has been transmitted without inter-
vention. The following are some of the reasons:
1. The sale of rice outside the critical period of July-September appears to
be an NFA mechanism for unloading excess stocks, especially when the
