Nora O. Gamolo, Senior Desk Editor
Manila Times

“Rice is an P80-billion local industry. Those who control the local production, as well as the importation of rice will surely control local and national politics, since rice is a highly sensitive and politically explosive product,” said Fernando Hicap, national chairman of the farmer-affiliated Pambansang Lakas ng Kilusang Mamamalakaya ng Pilipinas (Pamalakaya).

The government is targeting owners of rice warehouses, and has announced plans to raid warehouses. To date, even the military sector has pledged 200 out of 400 trucks needed to carry the rice and palay (unhusked rice) purchased by the National Food Authority (NFA). The Department of Trade and Industry vowed to collar profiteers and hoarders of prime commodities, intensify its monitoring and enforce laws against any diversion of government-procured rice being repacked by traders as higher-priced commercial rice. Price billboards or lists will now be posted more prominently.

The rice marketing system in the Philippines has always been dominated and controlled by a cartel of merchants. Rice imports when there is ample local supply will just solidify power of the cartel, said researcher Rosario Bella de Guzman, of the independent research group Ibon Databank.

Justice Secretary Raul Gonzalez has also confirmed the existence of a rice cartel.

Known as the Big Seven, this cartel’s existence was confirmed also by the Department of Agriculture, and the Senate concluded, “The combination and operations of these Big Seven traders force or compel other traders to buy only from them.”

In Senate hearings, witnesses have alleged that the members of the cartel are Joaquin Go Soliman (JOMERCO Trading), Pio Sy Lato (PNS Grains Center), Ramon Ang Syson (Family Native Supply), Gil Go (Jocardo Merchandising), Leoncio Tan/Janet Tiu (Leoneco Merchandising), Santos See (Manila Goodyear), and Teofredo Co (Teofredo Trading).

These personalities are respected Tsinoys who are also the influential members of the government-accredited Confederation of Filipino Rice and Corn Traders Association, or CONFED.

The Big Seven are alleged to control Dagupan Street in Metro Manila, depicted as a wholesaling center that supplies 45 percent of the total rice needs of Metro Manila. Its supply ends up in two other districts, Binondo (in Chinatown) and Paco, whose middlemen and retailers were alleged also to be controlled by the Big Seven.

The government found out that 22 percent of the daily rice consumption of Metro Manila come from the Dagupan-Binondo-Paco area. The cartel allegedly operates through a network of structured traders that funnel production to it, and at the same time are allowed to import heftily, having cornered valuable import quotas due to a liberal rice importation climate.

In 1995, the rice cartel was blamed when the country experienced an artificial shortage of rice and retail price shot up from P8 to P20 a kilo. While the Ramos government denied the shortage, some businessmen, politicians, and media attributed the artificial shortage to the half-visible rice cartel.

The number of rice wholesalers has increased as more rice millers concentrate on trading and as more rice imports flood the market due to the Philippine commitment to the Agreement on Agriculture (AoA) of the General Agreement on Tariffs and Trade-World Trade Organization (GATT-WTO) that the country ratified in 1995.

Since 1995, when the Philippines ratified the GATT-WTO’s AoA, the retail prices of rice have increased at a faster rate (52 percent) than farmgate prices (50 percent). Even as farmgate prices continued to decline, consumer prices still registered an annual average increase of two percent. This has been seen as proof that traders really have the power to determine rice prices as the country liberalizes imports while local production is down for various reasons.

Traders depressed farmgate prices, while raising retail prices according to whim. The National Food Authority was almost helpless to control the market since it cannot accommodate more than one percent of all production from farmers. Trade liberalization thus intensified monopoly pricing and operations, strengthening the cartelized operations of the rice trading business.

Said De Guzman, “The marketing structure defines the price structure and subsequently dictates the profit margins. A land-owning farmer gets 50 percent of the farmgate price as profit, while a tenant gets only 21 percent. A tenant with credit from merchants gets only nine percent.”

Farmers claim that the strength of the rice cartel is founded on social inequities, the lack of farm support mechanisms such as credit, technical assistance, and infrastructure for farmers from government, financing institutions, among others.

“Farmers are forced to borrow for production inputs from traders, compromising their produce as these are used as payment for commodity loans. Even before harvesting, production is already pledged to buyers who are part of the network of the cartel,” said Rafael Mariano, chairman of the Kilusang Magbubukid ng Pilipinas and chairman of the Anakpawis partylist.

If the government is earnestly set on dismantling monopolies and leveling the playing field for all stakeholders, the farming sector says there must be a full-scale investigation of the so-called rice crisis.

“There should be a full blown inventory of rice stocks held by the National Food Authority (NFA) beginning the last harvest season, including the volume of rice imported from Vietnam and other foreign sources,” said Mariano.

He also dared the Department of Agriculture (DA) and the NFA to present a master list of all local rice traders, importers, and retailers all over the country to identify networks and interlocking directorates in procurement, distribution, marketing, and retailing of rice across the nation.

Mariano sought reopening of the 1995 Senate report on rice cartel at the height of the rice crisis during the same year, since the names and operations of the rice cartel known as the Binondo 7 were substantially identified in said Senate probe.

The DA should bare the “true state” of rice production in the country, particularly the effects of land conversion, and how many hectares of rice lands were converted into “golf courses, subdivisions and industrial centers”, with the aim of reclaiming and reconverting these lands for rice production purposes.

Recognizing that precious funds were used for production, Mariano said, “The national government should also be put to task on how the P20 billion Agricultural and Fisheries and Modernization Fund, including the P4.2 billion Ginintuang Masaganang Ani Fund meant to procure 407,000 sacks of hybrid rice and 225,000 sacks of certified rice seeds last year was used up.”

Unless all market imperfections and social inequities are resolved, small farmers will find themselves still at the mercy of cartels and monopolies, he warned.