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THIRTEENTH CO 
REPUBLIC 
First Regular Session 
introduced by Senator S. 
EXPLANATORY NOTE 
The mandate of the National Food Authority (NFA) to stabilize the prices of 
grain is two-sided. On the one hand, the NFA sets a ceiling on retail prices of rice for 
consur-qer welfare, and on the other hand, it sets a floor on farmgate prices of palay to 
assure farmers of a remunerative price of their product. 
In offer to achieve its price objectives, the NFA performs a time arbitrage 
function in the palay and rice markets - Le, it buys grain during the harvest season to 
support prices when excess supply tends to drive prices down, and sells rice in the 
retail market during the off-harvest months to mitigate the upward pressure on prices 
caused by relative scarcity. 
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Due to financial constraints, the NFA’s procurement operations in the palay 
market covers only 5% to 7% of total production, which is insufficient to influence 
market prices. 
The bill proposes to authorize the NFA, subject to the approval of the 
Department of Finance, to issue Farmer’s Crop Certificates in order to supplement the 
agency’s funding resources and enable it to expand the coverage of grain buying 
operations and assist more farmers. 
Farmers’ Crop Certificates will be an interest-bearing instrument with a maturity 
of 180 days, with which the NFA can partially pay the farmer for the stock of grain that 
the latter deposits at any NFA warehouse. The proportion of the value of the crop to 
be paid in FCCs will not be more than 50% and subject to agreement between the 
NFA and the farmer. The FCCs will not also be negotiable and guaranteed by the 
national government; eligible for the agri-agra requirement of banks; and exempt from 
documentary stamp taxes and taxes on interest income and capital gains. 
As far as NFA is concerned, the authority to issue FCCs will free up its credit 
lines for other purpose and enable it to expand coverage of its buying operations. The 
tax exemption will allow NFA to offer lower interest without losing its competitiveness 
vis-a-vis other financial instruments. 


For the farmer, the NFA’s buying operations gives him an option other than to 
sell his crop at a loss to the trader at prices prevailing during the harvest season. The 
FCC also gives him an option if and when he can forego the liquidity of cash payment 
development of more vibrant rural financial markets. 
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for his crop. 
Overall, it is hoped that the FCCs will be the beginning of the 
In view of the foregoing, early passage of this bill is earnestly requested. 
c 
SERGIO OSMEaA 111 
Senator 


THIRTEENTH CONGRES 
) 
REPUBLIC OF THE PHILIPPINE 
1 
First Regular Session 
) 
, ,  
SENAT 
S. No. 
~ 
Introduced by Senator S .  R. Osmeiia 111 
AN ACT 
PROVIDING FOR A FARMERS’ CROP CERTIFICATE SYSTEM IN THE 
PROCUREMENT OF GAINS BY THE NATIONAL FOOD AUTHORITY (NFA) 
GUARANTEED BY THE NATIONAL GOVERNMENT. 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
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Section I. 
Title. - This Act shall be known as the “Farmers’ Crop 
Certificate System” for the procurement of palay and other grain by the National 
Food Authority. 
Sec. 2. Deckwafion of Policy. - It is hereby declared the policy of the 
State to ensure adequate support for the country’s rice farmers especially during 
harvest time, when chronic imbalances between the supply of and demand for 
palay in the country’s rice producing regions usually result in depressed palay 
prices . 
In furtherance of this policy, the state hereby creates a financial 
instrument that will encourage the movement of financial resources from urban- 
based financial institutions to the countryside, to be administered by the National 
Food Authority (NFA) in line with the Government’s palay procurement program. 
Sec. 3. Sfafernenf of Goals and Objectives. - The goals and objectives 
of this Act are the following: 


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a) to spearhead the development of other similar financial instruments 
which will allow financial institutions to participate profitably in the 
rural credit markets and improve farmers’ access to credit resources; 
b) to stabilize the farmgate prices of palay at levels that provide not only 
reasonable returns to farmers but also result in affordable prices for 
consumers ; 
c) to promote foodgrain marketing efficiencies through stakeholders’ 
awareness of, and access to, updated and upgraded foodgrain post- 
harvest technology and services; 
Sec. 4. Farmers’ Crop Certificate. - The National Food Authority shall 
issde the Farmers’ Crop Certificates (FCC) which shall be guaranteed by the 
National Government through the Department of Finance subject to the 
approved debt ceiling. The FCC’s shall be redeemable one-hundred eighty 
(180) days from the date of their issuance by the NFA or such maturity period 
that NFA may decide upon consultation with farmers’ cooperatives and 
institutional investors. The FCC shall bear an interest rate of Treasury Bills of 
similar maturity [and] subject to the approval of the Department of Finance. The 
FCC shall be a negotiable instrument which can be sold, bartered, purchased 
and/or used as collateral for any loan or debt incurred. 
Sec. 5. Availment of the FCC. - Farmers and their organizations may 
avail of the FCC system by depositing their palay/corn/grain produce at any 
authorized NFA warehouse. The NFA shall pay them cash for no less than fifty 
percent (50%) of the value of their grain deposit: Provided, however, That 
farmers and their organizations shall have the option of being paid in cash for a 
lower proportion of the value of their grain deposit, as may be agreed upon 
between the NFA and the farmers’ cooperatives; Provided further, That the NFA 
shall have the right to dispose of the grain in order to raise cash for payment to 
the farmers. The remaining proportion may be paid in F X s .  The NFA may also 
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issue FCCs to banks for the sole purpose of financing its local grain 
procurement operations. 
The holder of the FCC shall also be given the option to buy back the 
grains paid through FCCs: Provided, however, That he pays the authorized 
storage, handling andlor carrying charges imposed by NFA, including allowance 
for shrinkage; Provided further, That this option shall not apply to FCCs directly 
issued to banks or financial institutions. 
The NFA will assist the Land Bank of the Philippines in establishing * a  
secondary market for the FCC prior to its issuance in order to improve the 
acceptability of the FCC to farmers and their organizations. 
See. 6. Reference buying prices and producf standards. - The NFA 
shall adopt a reference buying price for palay/corn/grains based on [average 
prices during the lean months of the previous cropping season, and based on 
certain] minimum product standards. The NFA shall disseminate information 
regarding such reference buying prices and product standards among farmers, 
farmers’ cooperatives and organizations. 
Sec. 7. Exemption from Tax. - For a period of five (5) years from its 
initial issue, FCCS shall be exempted from the documentary stamp tax and 
taxes on interest income and capital gains Provided, however, That the 
President of the Philippines may extend this exemption for another five (5) 
years. 
Sec. 8. Alternative lnvesfment. - The FCC shall qualify as an 
alternative investment for the unused portion of the reserve fund requirement for 
agrarian reform credit availment under Presidential Decree No. 71 7. 
Sec. 9. lmplemenfing Rules and Regulations. - The Departments of 
Finance, Agriculture and the national Economic Development Authority, in 
consultation with the National Food Authority shall issue the necessary rules 
and regulations to implement the system. 
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revoked or repealed accordingly. 
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approval. 
Sec. 10. Repealing Clause. - Laws, rules and regulations and other 
issuances inconsistent with the provisions of this Act are deemed modified, 
Sec. 11. Effectivity. - This Law shall take effect immediately upon its 
Approved,