Rice price crisis dents Marcos Jr’s populist appeal

By Richard Javad Heydarian

Philippine President Ferdinand Marcos Jr promised to halve the price of rice to as low as 20 pesos per kilogram on the campaign trail last year.

Upon winning election, he reiterated his populist vow during a triumphant inauguration speech where the namesake son of a former Philippine strongman waxed eloquent about a future filled with prosperity and food security for the Filipino masses.

To underscore his commitment, Marcos Jr made the unprecedented decision to simultaneously lead both the Malacañang Palace as well as the Department of Agriculture. Now, in his second year in office, the Philippine leader faces a deepening food crisis which if not contained could start to dent his sky-high popularity.

This month, Philippine rice prices hit a 15-year high, giving the lie to government plans to reduce food inflation. The latest report by the US Department of Agriculture (USDA) showed that the Philippines has overtaken China as the world’s top rice importer.

If the war in Ukraine sparked food inflation last year, India’s rice export curbs imposed in August this year pushed prices for import-dependent nations such as the Philippines even higher.

Desperate to stop galloping prices, the Marcos Jr administration set a price cap for regular milled rice at 41 pesos per kilogram and for well-milled rice at 45 pesos a kilogram, well above the leader’s promised 20 peso promise made last year.

Though consumers widely welcomed the decision, the Philippine government’s latest policy will only further hammer domestic producers and small rice retailers, who have already been struggling with years-long massive imports from neighboring Vietnam and Thailand.

Food security crisis

It’s hard to overstate the food crisis in the Philippines. The Southeast Asian nation’s total rice imports during the 2022-2023 trade year hit 3.9 million metric tons. This is larger than China’s 3.5 million metric tons, even if the Philippines’ population is a tenth of its giant neighbor’s.

“In 2008, top importer the Philippines continuously bought larger volumes as prices escalated; this year, it is delaying purchases, awaiting lower prices,” the USDA report said, underscoring the price pressure faced by Filipino importers.

Climate change seen in droughts and erratic rainfall, coupled with protectionist policies, most notably India’s export curbs, have compounded the Philippine crisis. According to the United Nations’ Food and Agriculture Organization (FAO), global rice prices jumped 9.8% in August.

Thailand’s rice export prices surged to more than US$600 a ton, a near 50% year-on-year increase. Unlike other commodities such as onions and tomatoes, which often see short-cycle price hikes, elevation in rice prices tend to be more inelastic.

The Marcos Jr administration is clearly aware of the potential political fallout. According to a second quarter survey by Pulse Asia, a leading polling agency in the Philippines, inflation topped “the most urgent national concerns” among respondents.

Public disapproval of the government’s handling of food inflation reached a high of 52% last year, but eased to just 37% of respondents amid inflation deceleration earlier this year.

The deepening food crisis has coincided with flagging investor confidence in the Philippine economy. Net foreign direct investment (FDI) in the Philippines fell 3.9% on a year-on-year basis, while reinvestment of earnings dropped by a whopping 26.8% in the same period.

“The uncertainty of depending on external sources for our staple and the high price of imported rice makes it imperative for us to produce more locally,” Agriculture Undersecretary Leocadio Sebastian said in a statement, underscoring the perils of the Philippines’ high reliance on food imports.

For its part, the Department of Finance and the National Economic and Development Authority (NEDA) has proposed a temporary reduction or suspension of rice import tariffs to augment domestic stockpiles and lower prices.

Key Marcos Jr allies such as Marikina Second District Representative Stella Quimbo have backed a Philippine Rice Emergency Response Act, which gives the president extensive powers to adopt radical measures if necessary.

As the incumbent agriculture secretary, Marcos Jr has doubled down on commercial diplomacy to try to ease the crisis. Earlier this month, he met Vietnamese leaders on the sidelines of the ASEAN Summit in Jakarta, Indonesia, to finalize a five-year rice cooperation agreement.

Backlash and anxiety

The Marcos Jr administration has also introduced price caps to stem rising food inflation, while vowing to crack down on price manipulators, smugglers and hoarders.

“We note that the price of rice has been sharply increasing over the past weeks, which is inconsistent with the apparent supply and demand situation. This implies that some are manipulating the expected impact of El Niño to depict a shortage at this time,” said NEDA Secretary Arsenio Balisacan after the new measures were introduced earlier this month.

“We are confident that the imposition of a price ceiling is only a temporary measure. We expect [the] rice harvest to commence soon and anticipate that other initiatives will produce the desired result,” he added  in an effort to stem concerns over the potential distortionary market effects of price caps.

The response from domestic businesses and producers has been, at best, mixed. Large-scale and subsidized imports will likely batter domestic producers who cannot compete on price. Some civil society groups have called on the government to revisit its agricultural policy and even consider new leadership at the Department of Agriculture.

Earlier this month, the Federation of Free Farmers, a major civil society group, said it was “very worried” about new price caps, which it said have battered farmers from Pampanga in the northern island of Luzon to  Sultan Kudarat in the southern island of Mindanao.

For its part, the influential Federation of Filipino Chinese Chambers of Commerce & Industry, Inc said price caps would “never work” since they distort actual market dynamics and production costs.

In response, Secretary of the Department of Trade and Industry Alfredo Pascual clarified that not all rice varieties were covered by the new measures, which only applied to regular-milled and well-milled types.

As of September 8, days after the introduction of the new price caps, the price of imported commercial rice ranged from 43 to 65 pesos per kilogram, indicating perhaps the early inefficiency of the new government measures.

As prices rise and policies miss the mark, there have been growing calls for Marcos Jr to relinquish his post as agriculture chief in favor of experts such as NEDA Secretary Arsenio Balisacan, a renowned agriculture economist by training.

The personnel change was reportedly backed by key technocrats within Marcos Jr’s administration who realize the urgency of addressing the food security crisis before it snowballs politically.

But the NEDA chief, who is overseeing the Marcos Jr administration’s overall economic strategy, has clarified that “[n]o such offer [has been made by the president yet].”

Follow Richard Javad Heydarian on X, formerly Twitter, at @Richeydarian