January 26, 2023
MANILA — The existence of cartels is the only plausible explanation for the shortage of onion and the resulting high prices, Marikina 2nd District Rep. Stella Quimbo said on Wednesday.
The sharp rise in prices did not correspond to the small discrepancy — about 7% — between the supply and the demand for onions in 2022, Quimbo, an economics professor, said at the hearing of the House of Representatives Committee on Agriculture and Food.
She then asked Director Nieva Natural of the National Economic and Development Authority (NEDA) if the agency was conducting studies on the onion shortage.
“So NEDA, as the chief economist of the country, you need to look at that, right? The technical aspect of supply? Are you doing that and are you studying these issues? Because at the end of the day, if we cannot explain price movements, then the only answer is cartels,” Quimbo told Natural in Filipino.
“There just has to be artificial manipulation of prices because the market cannot explain why the prices move like that […] That’s the missing piece for me, Mr. Chair — cartels,” she added.
Quimbo was referring to the figures shared earlier by Director Gerald Glenn Panganiban, the officer in charge of the Burea of Plant Industry (BPI).
According to the BPI data, the demand for all kinds of onions was an estimated 363,973 metric tons and the supply was 338,354 metric tons — a difference of 25,619 metric tons, or 7.03%.
‘Very, very steep’ supply curve
Quimbo explained that the supply curve — or in economics, the rate of price in relation to the volume of goods that a seller can supply — has become very steep. In economic terms, it has become very inelastic.
“It is not clear to me why despite the mere seven percent shortage, the rise in onion prices has been sharp. So that can only mean that your supply curve is very, very, inelastic, it’s very, very steep,” Quimbo told Natural.
“We know that if demand exceeds supply, because of the market, what happens is the increase in prices. But it seems the rise is so steep. It means your supply curve is almost standing, right?” she asked, referring to the shape of the curve when graphed.
That could not have been the situation in 2022, she said, pointing out that, since 2019, the supply curve for onions was elastic due to the high supply and low prices.
That, she added, led her to conclude that external and artificial forces — like cartels — were in play.
“That doesn’t seem to have been the case in 2019, because we had low onion prices back then. The supply adjusted quickly. Supply was minimized quickly. In fact, Cong. [Micaela] Violago reported that the number of onion producers in their province [Nueva Ecija] dwindled,” Quimbo said.
Micaela Violago was a House member in 2019, the 18th Congress.
“It means supply is responsive. In short, you have two conflicting ideas: On one hand, it appears to have supply elastic (in 2019), but on the other hand, very supply inelastic,” she added.
Cluster discussion needed
In response, Natural said NEDA was also puzzled, noting that the steep onion prices could not be explained by mere market forces.
So she suggested that the economic development cluster — an inter-agency body— be convened to discuss the issue. She said the cluster had not yet met under the Marcos administration.
“It’s a puzzle for us also because it doesn’t make sense that the gap is small but the spike in prices is so high. We received information from some sources that in April farmers sold their produce at P10 per kilo — farm-gate. So we are wondering why retail prices reached around P600 by December when it was priced as such last April,” she said.
“So perhaps a good move — I’m not sure, but in the last administration, the economic development cluster handled these kinds of situations. However, right now, the cluster hasn’t convened,” she added.
Earlier, Quimbo scolded Panganiban, the BPI chief, for not informing the Philippine Competition Commission (PCC) about the presence of supposed cartels and the disappearance of onions, as the situation could pose a big problem to the economy.
Both Congress chambers probing onion prices
Currently, several legislative committees in the House and Senate are looking into the problem of skyrocketing onion prices — with red onions selling for around P400 to P600 per kilogram.
Both chambers of Congress set the hearings as the country grappled with the effects of agricultural smuggling, which has weirdly brought prices of raw products upwards due to cartelized imports.
The Bureau of Customs — the primary agency tasked to detect smuggled goods — has intercepted hundreds of shipments containing agriculture products that were either underdeclared or misdeclared as different items.
Most of the time, containers with smuggled goods consisted of raw food like meat, seafood, vegetables, and spices — particularly onions.