Wednesday, March 12, 2008

Rice Shortages In Philippines?

Roel Landingin and Javier Blas writing in the Financial Times:

The Philippines failed to buy enough rice on Tuesday to boost its inventories and faced prices more than 40 per cent high­er than two months ago in the latest sign of a rapid tight­­ening of the global rice market.

The failure underscores the risk that rice could be in short supply in south-east Asia countries, where the grain is a staple food. It also signals further food inflation pressures in the region, where consumer prices are rising quickly.

The world’s largest rice exporters, including Vietnam, India and Egypt, have imposed foreign sales restrictions to keep their domestic markets well supplied, tightening further the global market. More curbs are likely in the coming months as the rice market faces strong demand and lagging supplies, the US Department of Agriculture has warned. Global rice stocks are set to fall this year to about 70m tonnes, the lowest level in 25 years and less than half the 150m tonnes held in inventories in 2000.

At Tuesday’s auction, traders offered to sell the Philippines, the world’s largest rice importer, about 325,000 tonnes. The Philippines had hoped to buy 550,000 tonnes. Prices ranged from $618.50 to $745 per tonne, on average, 43 per cent higher than the $474.40 (£236.33, €309.11) per tonne paid in January. Thai rice prices, a global benchmark, last month broke above the $500-a-tonne level for the first time since 1989.

Gloria Macapagal Arroyo, the Philippine president, on Tuesday approved an incremental budget of 2.85bn pesos (£34m, $69m, €45m) to boost production of crops, mainly rice and corn, according to Arthur Yap, the agriculture secretary.

Amid fears of shortages, Manila took the unprecedented step last month of asking Vietnam to guarantee rice supplies of about 1.5m tonnes in a government-to-government deal.

But Vietnam said it would supply only about 1m tonnes, of which 700,000 tonnes represents previous contracts.

The Philippines could tap into regional emergency rice stockpiles to cover its im­ports requirements. The East Asian Emergency Rice Reserve, a scheme run by the Association of South-East Asian Nations (Asean), Japan, China and Korea, provides rice supplies to countries hit by disasters and other emergencies.

So far, the Philippines has ordered 876,700 tonnes of the commodity in the international market. “We’ll just have to try again and again until we meet our requirements,” said Mr Yap. “We are not chasing any price. Our aim is to ensure there’s enough supply.”

Local prices in the Philippines are already up 10 fold from a year ago.