December 5th, 2024
With the November rate in, it is all but certain that 2024 inflation will be within the 2-4 percent target of the government. This bodes well for both growth and for efforts to further reduce food prices next year.
Looking at the month-on-month inflation rate, the prices of rice and corn are on the downtrend, owing to the easing of pressures in the grains world market. That said, prices should be going down at a faster rate, considering the President’s reduction of rice tariffs, and faster decline in world prices. Month-on-month, world prices decline by as much as 11 percent, and given the share of imports in our total supply, at least a third of this reduction should have been translated into the market price.
These price distortions are why the House Murang Pagkain Supercommittee takes seriously its role in reducing food prices.
Rice retail prices should be closer to P40 than P50 given the decline in the world price and the tariff rate. We are closely watching Indonesia, which suffers from very similar issues of transport cost, logistics, sufficiency, and porous borders, and prices there have declined to around P44 per kilo at the retail level. Our own rice prices should decline to that level, at least.
That level would have also brought down year-on-year rice inflation down to as much as -2.2%, which could have brought overall inflation down this month to as low as 1.6%.
So, clearly, our joint committee has work to do.
Next week, we will be calling in the top rice importers. Landed price of imported rice has declined to about P36, all tariffs and fees included. Considering current farmgate prices, domestically-milled rice should also be at around P35-36 per kilo. So, players in the domestic rice trade sector are making as much as P14 per kilo in margins. There must be a way to bring this down.
By year-end, we will also send President Marcos some preliminary policy recommendations to help bring down the cost of food for the Filipino family.