SOP Library
SOP NO:
GM-G012
(List of Exhibits/Attachments)
Mission
:
Technical Support Services
Area:
Grains Marketing (GM)
Area:
Grains Marketing (GM)
Activity:
General Operation (GM-GO)
Title:
Revised SOP on Price Reduction of Cereal and Feedgrains
Date Approved/Issued:
05/10/1999
Date Effective:
05/15/1999
Digest:
I. TERMS OF REFERENCE
A. Rationale
B. Objective
C. Scope
D. Basis
II. IMPLEMENTING GUIDELINES
A. Stocks Covered
The following stocks may be sold thru price reduction:
1. Reconditioned/Remilled stocks in which all efforts to dispose it at regular selling price were proven futile due to the following condition:
change in color without sack odor and flavor;
stocks with slight sack odor and flavor;
stocks with moderate sack odor and flavor; and
stocks with strong sack odor and flavor
2. Unreconditioned (“as is”) partially damaged stocks which may still be used in its original form or use (e.g. rice for human consumption or feedgrains as animal feeds), which cannot be disposed at regular selling
price.
B. Reduced Selling Price
1. Provincial Committee primarily responsible for determining the reduced selling price shall be created to be composed of the following:
Chairman - Provincial Manager (PM)
Vice Chairman - APM/Provincial Operations Officer
Members - Economist II
Sr. Accounting Specialist
Provincial SQAO (Sr. GOO)
2. A Regional Committee responsible for the evaluation of request for price reduction shall likewise be created to be composed of the following:
Chairman - Asst. Regional Manager
Vice Chairman - Regional Operations Officer (Spvg. GOO)
Members - Economist III
Accountant IV
Regional SQAO (Spvg. GOO)
3. The following factors shall be considered in determining/evaluating the reduced selling price:
a) Break-even Landed Cost - it is an estimation/computation of the break-even marketing/landed cost taking into account the following:
Actual buying price plus incentive and other procurement expenses
All dispersal expenses from any source to the final destination. If stocks came from various sources, weighted average dispersal expense may be computed, based on the volume of stocks from each source.
Other direct costs/expenses such as trucking, arrastre, wharfage, insurance, brand new container, milling expenses, freight, handling, interest and other indirect expenses related to dispersal;
Additional revenue from sale of by-products.
b) Prevailing Market Price
A canvass of the various levels of prevailing prices, (wholesale, ex-farm, retail) in various municipalities/areas within the province should be made. An analysis of the price trends and levels is one of the most important price considerations. Since price setting will also be based on prices in the source areas, it is important to keep track of reports generated by the Provincial/Regional Information Center to check developments in nearby source/destination areas.
c) Analysis of Supply and Demand Situation
Level of Commercial Stock Inventory
An update and projection on the level of commercial stock inventory should be made to determine the possible level of NFA participation in the market.
Level of NFA Stock Inventory
A thorough study on the level of NFA participation based on the movements of prices and supply should be undertaken. This will show the possibility of stock movements from and to the area.
Level of NFA Injection
An analysis of the monthly if not weekly historical NFA injection should be made to establish the trend of the distribution system.
Stock Inventory and Prices of Other Commodities/Substitutes
The levels of stock inventory of other commodities/ substitutes and their corresponding prices must also be analyzed and considered to further strengthen the decision on the level of selling prices that were set. The extent of influence of these substitutes should therefore be fully analyzed.
Level of Commercial Stock Movements
The movements of commercial stocks should be closely monitored since the entry and exit of commercial stocks especially in big volumes would significantly affect the supply within the area.
Production/Consumption Patterns
The seasonality and volume of expected production not only within the area but also in nearby areas must also be monitored and analyzed to aid the decision-maker in timing the upward and downward movements of NFA selling prices.
d) Book Value or Moving Average Cost - in accounting parlance, book value based on moving average method is composed of procurement and capitalized expenses or inventory cost incurred in transfer-in, procurement, milling, importation, drying. This does not however, include overhead expenses composed of operating and administrative costs. Under this method, the cost of the goods on hand at the end of a period is assumed to be the cumulative weighted average of the inventory cost of the goods on hand at the beginning of the period and of all goods purchased and received less sales/transfer-out during the period. It can be noted that the inventory referred to in this method considers all exiting stocks regardless of quality condition.
e) Canvass of Offers (certified by P.M.) - from about five (5) to ten (10) prospective buyers (e.g. PHRs/traders/ wholesalers) in the province including quantity each buyer is willing to purchase and the duration of the offer. A number of at least three (3) interested buyers would be adequate provided that the recommending office has proven to have exhausted all possible outlets.
f) Laboratory Analysis (stating extent of damage) as analyzed by the regional laboratory supported with sensory evaluation and with the confirmation from the Technology Resource and Development Department (TRDD).
g)
Comparative Cost Analysis Between Remilling and Selling at Regular Price Versus Reduced Price on “As is, Where is”, Basis
.
The COA unit of the Provincial Office (PO) shall also be furnished duplicate copies of memoranda/reports/studies and its supporting documents (i.e. canvass of offer, etc.) covering the above evaluation factors endorsed to the Regional Office/Central Office (RO/CO), which were used as bases by the NFA in arriving at a recommended reduced selling price.
4. There is no hard and fast rule in setting the reduced selling price. It shall be on a case to case basis and will basically depend on the prevalent and projected situation at the time of the evaluation. The factors to be considered in setting the reduced selling price as enumerated above may have different weights from time to time or from area to area. Thus, a thorough qualitative and quantitative analysis of each of these factors should be made before any decision is arrived at. The factors (including their corresponding weights) should therefore be presented to justify the decision on the level of a particular reduced selling price.
An example of comparative cost analysis as one of the basis for decision-making is shown in Annex I.
C
.
Wire Request for Price Reduction
1. Request for price reduction of all stocks regardless of book value shall be transmitted to the Regional Office for preliminary evaluation.
2. To facilitate actions on price reduction, wire request shall contain the following data needed for evaluation:
a) commodity/variety
b) recommended reduced selling price
c) original selling price
d) market outlet
e) quality and age of stocks
f) laboratory analysis (with extent of damage)
g) quantity in bags and equivalent gross weight in kilograms
h) book value inclusive of overhead cost
i) break-even cost of subject commodity
j) name of warehouse where stocks are being stored and pile number of stocks
k) canvass of prevailing prices of commercial stocks in the locality conducted from at least three (3) wholesalers and retailers
l) canvass of offers as stated in item
III.B.3.e
m) analysis of supply and demand
n) cost analysis between remilling and selling at regular price versus reduced price on an "as is, where is" basis.
3. In order to speed up the processing of requests, the PM/OIC shall ensure that the wire requests contain complete information. Wire requests with insufficient data shall not be processed until same had been fully complied with.
4. Upon transmittal of the wire request for price reduction, the PO concerned shall send the original copies of the accomplished canvass sheets, results of laboratory analysis, and/or sample of the stocks if necessary for re-analysis to the RO.
5. Requests that need further evaluation (if recommended reduced selling price is below the break even cost) shall be endorsed by the Regional Manager to DMO together with all the supporting documents.
6. In extreme cases when the stocks are in deteriorating state, further laboratory analysis is vital to determine its fitness for human consumption. Thus, a sample shall be required by DMO for appropriate analysis at TRDD laboratory. Corn stocks shall be subjected to aflatoxin analysis.
D.
Approval of Requests
The specifications of authority for the approval of the request and the corresponding reduced selling prices for cereals, feedgrains and by-products whether there is profit or loss shall be as follows:
1.
Reduction in selling price of sub-standard and damaged rice, white corn, yellow corn and white corngrits except marine damaged stocks:
a) Substandard and damaged rice, white corngrits, white corn and yellow corn totalling to more than 500 bags, should first be subject to SMDP as provided in SOP No. GM-DN12 on Sale thru Market Determined Pricing (SMDP) issued and made effective June 26, 1998. However, when no buyer/offeror participated in the scheduled SMDP, or when part or a fraction of total stocks subjected to SMDP remained unsold, the issuance of a selling price bulletin can be resorted to Price quotations submitted in the SMDP shall be used as indicators in setting the selling price under SPB. If there is no offer at all, the canvass of commercial prices for same stock and condition in the market shall be the indicator.
b) Reduction of selling price of substandard and damaged rice, white corngrits, white corn and yellow corn totalling to 500 bags and below:
Transaction
Recommending Approval
Approving Official
b.1. If recommended reduced Provincial Manager Regional Manager
selling price is at or above
the break-even cost
b.2. If recommended reduced Provincial Manager, Administrator
selling price is below the Regional Manager,
break-even cost Dept. Mgr., DMO/
Asst. Adm. for Opns./
Dep.Adm. for Opns.
2. Reduction in Selling Price of sub-standard and damaged by-products
a. If recommended reduced Provincial Manager Regional Manager
selling price is at or above
the break-even cost
b. If recommended reduced Provincial Manager, Dep't. Manager,
selling price is below the Regional Manager, DMO
break-even cost
E. Issuance of Selling Price Bulletin
Upon approval of price reduction, a Memorandum/Selling Price Bulletin shall be issued by the approving authority for proper documentation of price specifically for the particular stocks.
F
.
Reporting
1. The RO shall submit to DMO attention: Operations Planning Division (OPD) a monthly Report on Stock Approved for Sale at Reduced Prices (ROMO-DIST-03-I88) detailing therein the commodities, selling prices, bases for price reduction, etc. The said report, covering all stocks in the region of which prices were reduced, shall be submitted by the RO to DMO on or before the 10th of the succeeding month.
2. A Sales Report on Price Exemption
1
/
(PORO-DIST-O4-I87) shall be wired to the RO and to DMO attention OPD, by the concerned PO. However, the sales shall still be included in the monthly Grains Distribution Status Report being submitted to the RO.
G.
Imposition of Disciplinary Action
With this SOP, it is presumed that stocks for price reduction would be immediately disposed without reaching the point that said stocks would become accumulated damaged stocks. Otherwise, inaction and/or negligence on the part of concerned officials/employees shall be considered as offenses in violation of this SOP and shall, in accordance with P.D. 807 and RA 6713, subject the offender to the Administrative offense of Violation of Reasonable Office Rules and Regulations and shall, upon conviction, suffer the penalty of Reprimand, Suspension or Dismissal, as the case may be, provided that the specific act complained of does not constitute higher offense such as but not limited to, Dishonesty, Gross Neglect of Duty or Grave Misconduct, in which case, they shall be subject to such higher offense and shall upon proper conviction suffer in the penalty of Dismissal from the Service or such penalty as provided for in P.D. 807 (Civil Service Law) and 6713 (Code of Conduct and Ethical Standards of Government Employees).
The offender shall likewise be subject to the appropriate Criminal and/or Civil Action as the facts and evidence may warrant under the circumstances.
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any deviation of price (above or at reduced price) from the regular selling
price set by the Selling Price Bulletin
The foregoing revised SOP supersedes SOP No. GM-G007 issued on April 1, 1987 and GM-G007.A issued on December 1, 1987.
All rulings and or issuances inconsistent herewith are hereby superseded.
III. RESPONSIBILITIES
IV. FLOW CHART
Top Page
EXHIBITS
Comparative Cost Analysis Between Remilling
and Selling at Regular Price Versus Reduced
Price on an "As is, Where is" Basis
Comparative Cost Analysis Between Remilling