NFA mulls hike in selling price

MANILA, Philippines — The National Food Authority (NFA) is considering raising its selling price of rice to as much as P36 per kilogram to recover its costs and keep profit margins after it increased its palay buying price last year.

Agriculture Secretary Francisco Tiu Laurel Jr. confirmed to The STAR that such a proposal is on the table and he is studying it “carefully.”

“I have to study this carefully but for now for sure there is a need to increase [the selling price] because the [buying] price of palay increased,” Laurel said in a recent interview.

Laurel, who is also chairman of the NFA Council, said raising the NFA’s mandated selling price is “tricky” since it must take into consideration the price movements of both palay and rice in the market.

The NFA Council is the agency’s highest policy-making body.

Highly-placed sources told The STAR that the council is considering the increase of the state-run agency’s mandated rice selling price to between P32 per kilogram and P36 per kilogram.

At present, the NFA sells its rice stocks to agencies involved in calamity and relief operations at P23 per kilogram and P25 per kilogram depending on the quality.

Sources said the proposal came from the NFA management last year after the agency’s effective buying price of palay was increased to P23 per kilogram from P19 per kilogram.

The NFA’s total costs for the sale of rice is around P41.5 per kilogram while its gross revenue is around P55.2 per kilogram, resulting in a gross income of P13.7 per kilogram, according to sources.

The NFA gets an annual subsidy, currently at P9 billion, from the national government to cover some of its costs, particularly the procurement of palay.

Keeping the NFA’s mandated selling price at P25 per kilogram might “erode” the agency’s net profit per sale, resulting in a possibility of ending this year with a break-even bottom line, sources said.

A higher NFA selling price would mean that government agencies like the Department of Social Welfare and Development that get rice stocks from the NFA would have to pay more, Raul Montemayor of Federation of Free Farmers said.

“They have to at least recover their costs, because if they buy at P23 per kilogram, the palay cost of their rice will be P38.33 per kilogram without including storage, freight, overhead and other costs,” Montemayor said.

Senen Reyes of the University of Asia and the Pacific (UA&P) cautioned, however, that increasing the NFA’s rice selling price could send a signal that may influence private traders to increase their selling price as well.

Reyes noted that at times private traders track the price movements of the NFA and factor it in in their selling prices.

“The signal that gets to the market is that we will increase our retail prices. If it is around P32 to P36 per kilogram, the retail prices of private traders might reach P60 per kilogram,” Reyes, the executive director of the UA&P’s Center for Food and Agri Business, told The STAR.