Rice prices might reach P40 per kilo in July, group warns

(Update 2) MANILA, Philippines - The Rice Watch and Action Network on Wednesday warned that unless the government acts now prices of commercial rice could reach P40 per kilo in the next few months, as the Philippines faces serious rice supply crisis due to dwindling domestic production. Rice Watch said the rice crisis might erupt in July, the start of the lean season, but the government said it would deal with the looming crisis with heavy rice importation. The Department of Agriculture announced Wednesday that the Philippines signed a deal to import rice from Vietnam to boost local reserves at a time of rising prices and shrinking global stocks. According to Rice Watch's estimate, the country would need 2.8 metric tons of rice during the lean months. However, the April rice harvest would only be 1.9 MT, which is good for two months. Jaime Tadeo, chairman of the National Farmers’ Council, said rice prices could reach P40 per kilo from the current average of around P25. He blamed the country’s dependence on rice importation for the rice supply shortage. “The Philippine government does not have a program that would boost rice production. It totally relied on importation," Tadeo told reporters during a forum in Quezon City. "The traders will definitely take advantage of the limited supply, while the government will be dependent on the imported rice for its buffer stock," he added. The Philippines consumes about 11.9 million metric tons of rice annually, most of which is grown domestically. But dwindling domestic production and corruption in the rice supply chain have created a recurrent shortfall of about 10 percent. The government has to purchase about 2 million metric tons from the international market every year, making the Philippines the world's biggest rice importer. The Agriculture Department says rising demand in the Middle East and Africa has increased the price of rice in Vietnam and Thailand — the world's top exporters — to up to $500 (€317) per metric ton, a 25 percent jump in just the last month. Agriculture Secretary Artur Yap said the government has signed an agreement with Vietnam guaranteeing the supply of 1 million metric tons of rice. The National Food Authority, the state-owned grains trading company, has so far signed contracts for 1.2 million tons of rice, mostly from Vietnam and Thailand. Yap said the government's rice reserve would last 57 days, and denied there was any shortage, "even if prices are high." A number of factors contributed to rising costs, he said, including higher fertilizer and oil prices as well as climate change. The government plans to increase local production by planting an additional 600,000 hectares (1.5 million acres) of rice during the rainy season in the country's 10 poorest provinces and another 500,000 hectares (1.2 million acres) in other provinces, he said. President Gloria Macapagal Arroyo has vowed to crack down on rice hoarders, people who buy rice at a subsidized price from the NFA and sell it at a higher price in markets. Though no charges have yet been filed, Yap was staking out warehouses and following trucks to see where the rice was going, she said. Imports could hit P58.7B Sen. Francis Escudero on Wednesday said government spending for rice imports to avert looming shortage could hit P58.7 billion and P21.7 billion of which would go for subsidy. Escudero said that if imported rice costs P29.40 a kilo and National Food Authority (NFA) retailers would sell it at P18.50, then the P10.90-per-kilo difference would be the "political premium" the Arroyo administration would have to pay to prevent the perceived lack of rice. Imported rice price tag stood at $707 per metric ton based on what the government paid for the 335,000 metric tons it purchased this month. Thus, the two million metric tons targeted for importation this year would cost P58.7 billion at current peso-dollar exchange rate. “Of this amount, only P37 billion can be recouped, assuming zero trading, storage and transport losses," Escudero said. According to him, estimated import price assumes no tax paid, which is 40 percent of imported value under the country's commitments with the World Trade Organization, as the tariff could be waived if food shortage is invoked. But the senator doubted it if duties would be fully waived as tax payments on rice imports (or Tax Expenditure Fund) bloat the tax effort and make for a beautiful revenue report card. Moreover, the P58.7 billion fund to be spent on rice importation is equivalent to what we can collect from VAT on fuel this year, Escudero said. According to him, "Taxes collected on the gas pump will just be swapped for rice. The rise in the world prices of rice, which translates into bigger corporate subsidy for NFA, was never factored in this year's expenditures." As a result, the plan to have a balance budget this year "is in peril," he said. "It's either a balance budget or a balance diet. In this clash of policies, I predict the 'politics of the stomach' to win hands down," he added. Amid a growing population, global tight supply of rice and low local productivity, the Philippines is scrounging for crumbs left in the world rice market to avert a shortage. - GMANews.TV