Of lockdowns and rice value chains: What is the most organized and secure way of distributing rice to households?
Annette Balaoing-Pelkmans, Jane Lynn Capacio, and Tara Alessandra Abrina
In the middle of a public health emergency and a lockdown, how can the government ensure that the supply of rice is enough for affected Filipino households?
There was already an instability in rice supply, demand, and prices even before the onslaught of COVID-19. This is because the passage of the Rice Tariffication Law (RTL; Republic Act No. 11203) disrupted the status quo of restricted rice importation. While the market and numerous stakeholders of the rice industry were still navigating towards whatever equilibrium that can be reached, the threat of COVID-19 and the lockdown of Metro Manila and other parts of the country happened.
This post intends to support policymakers who are thinking hard and fast on how to safely and quickly distribute rice to households in Metro Manila during the enhanced community quarantine (ECQ). Using a value chain framework, this post provides a snapshot of the likely situation upstream and the possibilities for addressing constraints along the way. It also asks some key questions with regard to logistics and downstream activities and identifies data that are needed to be able to come up with effective decisions.
While this post gives remedial recommendations, there remains a need to carefully consider a calibrated lockdown that allows the movement of people and supply of goods (particularly food) while ensuring that health protocols are strictly followed.
Putting rice in a value chain
A value chain could be understood as the interdependent production process geared to create value for end consumers. It involves “a whole universe of suppliers and service providers, from the producers of raw materials, to consolidators, processors, logistics providers, packagers, product developers, administration, management, marketing organizations, wholesalers & retailers. Value chains look at the whole interaction and interdependence of multiple actors and firms, with the lead firm being principally responsible for the governance of the entire system of production.”4 A value chain is depicted in the figure below.
Rice value chains, in general, are not price-friendly to both smallholder rice farmers (producers) and end buyers (consumers). This is not just because informal lenders, traders, and other stakeholders squeeze every peso they can get from farmers and buyers, but because it is also extremely difficult to get consolidated output and deliver scale. The universe of actors in the marketing of rice alone includes spotbuyers, trader-lenders, farmer-lenders, millers, truckers, wholesalers, wholesaler-retailers, and the National Food Administration (NFA).
Given the numerous problems in value chains, “value” is often cornered by those who can provide efficiency premium, or those who can help consolidate the product and bring these to the next player in the value chain. The efficiency premium is represented by the red spaces in the figure below. We can see that efficiency premium is also smallest for smallholders.
Why is it so expensive to deliver rice to retail markets and end consumers? Upon harvest, the palay needs to be dried, milled, packaged, and delivered. Farmers (and their organizations) have the option of delivering it to the NFA, but most smallholders deliver it to trader-lenders who loaned them inputs and cash for production and other purposes. Trader-lenders then sell the palay to millers, who later sell it to the next processor or actor in the chain. The value chain is governed by relationships. Some of these relationships are thickly intertwined.
Disequilibrium after RTL and before COVID-19
The Rice Tariffication Law was passed precisely to reduce prices for consumers. However, it also reduced farmgate prices (See Table 1 below).5
This explains why there are apprehensions about the supply of rice during the current COVID-19 pandemic. The farmgate price of palay and wholesale/retail prices of rice were not yet stabilized when COVID-19 hit and lockdown was imposed. Moreover, as of January 2020, there was no list of farmers typologized in terms of size, location of farms, participation in an organization, and other details, which could be useful in picturing the rice industry.
Options for the government
The government now needs to consider several things in addressing how to distribute rice to locked down households in the most organized and secure way. If the priority is for the government to purchase milled rice and to make it available to Metro Manila households (due to size of population and length of lockdown), the following preliminary suggestions could be considered by policymakers:
Upstream of the value chain
- The buffer supply of rice could be identified through a quick scoping of government and private warehouses. An inventory of traders who are willing to sell their stock to the national government and the volume that they offer is useful.
- The expected harvest for the dry season (May to July 2020), as well as the surplus that farmers and other stakeholders (e.g., traders, local governments) are willing to sell to the national government, can be projected. In transactions, consider interlinked relationships and identify if it is the traders, farmers, or landowners who can sell to the government. The Department of Agriculture (DA) could seek the help of local governments and the Department of Agrarian Reform (DAR) for these kinds of information.
- The national government should not distort the prevailing local market price in purchasing rice supplies.
- In the longer term, the expected harvest during the wet season (June to November 2020) should be identified, as well as planting requirements (e.g. inputs, capital, possible sources).
Downstream of the value chain
- Identify the current supply in Metro Manila and the sources of this kind of information.
- The efforts of the DA to set up a market for agricultural products (e.g., the Kadiwa ni Ani at Kita6) is a welcome step to continue the trade of rice and other agricultural goods.
- The Kadiwa ni Ani at Kita and other means to sell rice and agricultural products in areas on lockdown should be complemented by distributing (free) rice to poor households through local governments. There could be a prioritization in this distribution (e.g., severity of poverty).
- The government should purchase the supply of rice and be ready to use its own or private movers’ transportation facilities to deliver to Metro Manila. These vehicles should be given free passes on all roads.
- Rice traders and organizations that deliver to Metro Manila should be given food passes. Efforts of the DA to expedite the distribution of food passes and to answer concerns (e.g., delays) through hotline numbers are welcome.
- Ensure compliance with health protocols in the process of delivery and distribution.
- On rice importation
Gauge the possibility of importing rice from trading partners such as Vietnam, Thailand, India, and China.7 •
Pelkmans-Balaoing, Annette O. 2019. “Levelling the Playing Field for the Rural Poor Through Inclusive Agricultural Value Chains.” UP CIDS Discussion Paper 2019-01. Quezon City: UP Center for Integrative and Development Studies.