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Supply and demand

 

By DR. RAMON RICARDO A. ROQUE

 

IS there an end in sight on the soaring prices of consumer goods that pushed inflation rate to 6.4% in August 2018?

The case of the rising prices of commercial rice varieties is the most glaring illustration of inflation in our country and of the inability of our government to effectively solve the problem. As the Filipinos’ staple food is rice, the rising price of it amplifies the problem.

The government declared in many occasions through the pronouncements of the Secretary of the Department of Agriculture and the President himself that there is no rice shortage in the country.

The rising price of commer­cial rice has been attributed to the alleged rice hoarders. The President has, in fact, warned rice hoarders in his last State of the Nation Address.

In the context of the basic law of supply and demand, does the current market situation point to rice hoarding as the cause of the rising price of commercial rice? Is there are shortage in the sup­ply of commercial rice varieties in the market?

There appears no shortage in the supply of commercial rice varieties yet their prices continue to rise.

Hoarding? Has the govern­ment validated the claim that there is rice hoarding and the extent of which caused the cur­rent problem on rice prices?

What is clear is not rice hoard­ing but the shortage of the supply of NFA rice even if the government, through the NFA, has already imported rice.

The proof of the NFA rice shortage is clear in the current situations in the market – people are lining up to buy limited quan­tity of NFA rice from authorized retail outlets that have supply that is less than what the market demands.

The case of the rising prices of commercial rice is simple – prices continue to rise because the demand for commercial rice remains to be high because there is still shortage in the supply of NFA rice.

With the current price of com­mercial rise, it will not serve the interest of rice traders to hoard unless they know for certain that the price of commercial rise will continue to increase in the coming days, weeks and months. Rice traders will only hoard given the current prices of commercial rice varieties if they know that the shortage in the supply of NFA rice will continue.

Has the government imported enough quantity of rice to drive the price of commercial rice down? The answer to this question points to what the government needs to do to address the problem of inflation and lighten the burden on Filipinos particularly those who are economically challenged.

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