Will The NFA Close Shop?

Most of us have been transfixed on juetengate 2010 and the striptease routine in the release of the report into the botched rescue of a busload of foreign tourists.

Now it’s time to read this:

For years, the National Food Authority has been the guaranteed buyer of palay from Filipino farmers and buffer importer of rice to the tune of 20-plus percent of the total rice supply in the market and making prices stable.

But while we were not watching, the National Food Agency has seen its requested P15 billion allocation in the 2011 budget slashed by the Cabinet to P8 billion.
Simple belt tightening to curb the budget deficit?

Not really it seems.

The budget has actually been strangely transferred it to the DSWD without prior consultation with NFA officials.

Answer me the question:

How is it that the DSWD itself will now become involved in rice importation minus any track record of conducting such activities?

NFA Administrator Lito Banayo is warning of a looming shortage of NFA rice for the poor should the Aquino administration fail to release the remaining P6 billion budget of the agency.

"We’re close to putting up the shutters on our retail operations. If the DBM (Department of Budget and Management) will not release our remaining budget this year, we will have to close Batanes, Aurora, Masbate, Catanduanes, the entire CAR (Cordillera Administrative Region), Sulu, Tawi-Tawi, Basilan, Bohol, Cebu, all of Regions 8 and 9. Even Coron and Busuanga will be closed for selling rice.

Banayo notes that of the NFA’s total allocation of P8 billion for 2010, only P2 billion has been released.

This was surprisingly decided on at Cabinet level as domestic production of palay is projected to be flat as previous events last year and this year will just even out with bad weather conditions having brought down second quarter farm production by 2.18 percent and by 2.88 percent in the first quarter of the year.

Banayo admits that the NFA has been losing money from selling cheap rice at prices below the purchase price. Records show that NFA losses had ballooned to P177 billion of which P54 billion consisted of suppliers’ credit.

"We cannot do anything about that. It is our mandate to ensure there is food for the poor, to provide a way for poor people to have something decent on their table," Banayo says.

Banayo is worried about the prospects of the proposed 2011 budget based on a restructured NFA.

The DBM has slashed the proposed P58 billion budget requested by the agriculture department to P37.7 billion

But the NFA chief rightly points out:

"We cannot work on a zero budget as what is being proposed by the budget department
based on their version of a restructuring program for the NFA. I worry about provinces like Occidental Mindoro where 30 percent of palay produced is being bought by the NFA.”

If this comes to pass, what are the feared consequences?

A sampling from recent news reports:

Anakpawis party-list Rep. Rafael Mariano: The proposed budget of the DA for 2011 "will further worsen the rice crisis and food insecurity in the country."
"Unscrupulous rice traders operating the domestic rice cartel will have a heyday with NFA’s zero budget and intervention in the market through unjust rice pricing and manipulation.

Cagayan Rep. Jack Enrile (NPC):
“Just imagine the nationwide confusion and economic exploitation if this is implemented by a department that has no experience in farmer subsidy operation, warehousing and marketing.
I cannot allow this abrupt change of policy that can cause an adverse effects on farmers as well as rice producers and consumers. Without the budget, NFA would cease to be socially and economically relevant and worse the poor farmers would be placed under the mercy of profiteers and other exploiters.
The honorable secretaries of Budget, Finance and Welfare should explain their action to our people. They may have the noble intention of suddenly changing the policy but it’s also possible that they overlooked the political, social, economic and national security implication of their collective action. Their timing alone is bad enough because obviously they did not consider the plight of our farmers who have just been through a series of typhoon and El Niño calamities that devastated thousands of hectares of their farmlands in many regions of the country.

BSP Deputy Governor Diwa C. Guinigundo:
The possible removal of government support in the NFA importation of rice will move inflation rate higher by 0.37 percentage point for 2010 and 1.24 percent for 2011. BSP assumes a fare hike of P5 for jeepneys and P10 for taxis. The price of rice will likely increase if subsidy such as tax exemptions will be reduced or removed. NFA rice is priced at P25 per kilo.

This could very well pull retail prices of rice to as high as 34 to near 40 pesos per kilo!


Verily what could happen now is local farmers will see the further depression of palay farm gate prices with the private rice cartel raking in profits and government abandoning its long running commitment to keep politically-sensitive the supply and price of rice within reach.

Further, instead of shutting down the NFA shouldn't it be be reformed to make it more efficient, cleanse operations prone to graft, and make it more responsive to the "matuwid na daan" agenda?

Or will the Aquino administration rather play with fire?