The study analyzed the interplay between the palay farm gate price and government price subsidy for palay in Nueva Ecija, Philippines. The paper argued that there is a gap in the implementation of the latter (government subsidy). Hence, this paper determined the monthly pattern of prices of palay, measured the difference between the average farm gate and government support price (subsidy) for palay from 1994 to 2005 and its influence to actual government procurement of palay vis-a-vis the supply and demand of palay grains in the market. The study utilized secondary data from the National Food Authority (NFA) and Bureau of Agricultural Statistics (BAS). This was subjected to t-test to assess whether the means of two groups were statistically different from each other. In general, farm gate prices (FG) (in the province) were higher compared to the government support price (subsidy) except in the years 1999, 2000, 2001, 2002 and 2003. From the years 1994 to 1998 and 2004 to 2005, the t-value is greater than the critical values of the t-distribution leading to the rejection of null hypothesis that government support price is higher than the farm gate price. The NFA consolidated actual procurement in (Nueva Ecija) the province that from the years 1994 until 2004, it constituted (a measly) 0.95 percent of the total palay production equivalent to 9,828,224 metric tons. This yielded a correlation coefficient between the actual price subsidy and actual procurement as “significant but very low” with a value of 0.16. The actual procurement correlation to farm gate price showed a significant but negative correlation of -0.18. This means that as the farm gate price increases, the actual procurement of NFA decreases. The subsidy and farm gate prices are positively correlated with a coefficient of 0.54 significant at 1 percent level. The study concluded that the objectives of subsidy are not met and necessary governmental adjustments must be made to realize them.