Market structure, conduct and performance of the rice milling and trading industries in the Philippines

The market structure of the rice milling and trading industries was imperfect based on descriptive analysis, four-firm concentration ratio (CR4), Lorenz curve, and gini-coefficients. Except for the rice retailing industry, market concentration increased and a high degree of inequality was observed in the rice milling, wholesaling, and wholesaling-retailing industries. Paddy and rice traded in the market were highly differentiated with no proper grading and standardization systems used. There was a high level of barriers to entry and exit in both industries. Market information was regarded as imperfect because of the lack of credibility of the source and unreliability of the information disseminated among the participants in the market. Results of the market conduct analysis showed that different price and product policies were used by both industries to adjust and coerce their market opponents. Market performance was measured using pricing efficiency, productive efficiency, profitability, and progressiveness. Results of analysis showed that the rice milling and trading industries were price-inefficient because of the weak degree of market integration between market levels brought about by inadequate infrastructure and high transportation costs. Rice mills were underutilized and economies of scale only exist in large-capacity rice mills. The large-scale rice mills generated higher net returns than the small ones. Rice wholesalers received much net return based on volume sold. Big millers and rice traders with enough capital were progressive. Success of operation in both industries was constrained by the following: low sales, difficulty in rice disposal, cumbersome licensing requirements, inadequate paddy/rice supplies, low collection or turn over rates of receivables, low milling recovery, high transportation costs, lack of grades and standards for grains, and lack of capital requirement