Price disagreement to delay rice shipment from Thailand

The shipment of 200,000 metric tons (MT) of rice from Thailand due this month will be delayed because of the failure of Philippines and Thailand to agree on the price for the commodity.

National Food Authority (NFA) deputy administrator Gregorio Y. Tan Jr. said the scheduled delivery this month will no longer be followed because talks on pricing continue to drag negotiations between the two countries.

NFA council member Jesus B. Varela said Trade and Industry Secretary Manuel Roxas II who heads the Philippine negotiating team is insisting that the Thai state trading agency, Department of Foreign Trade (DFT), match the lowest bid price in the auction held last March 12 which was $183.44 per MT (C&F) offered by Toepfer International.

DFT’s offer price price was higher by $11.41 at $194.85. Tan said Thailand has not indicated its willingness to match the lowest bid price.

Rice traders said it would be difficult to expect DFT to concede since Thailand rice normally has a premium over Vietnam rice by at about $15 per MT due to its internationally accepted higher quality.

Last month, the Philippine government awarded to Vietnam state trading agency Vietnam Southern Foods Corp. (VSFC) a total of 187,500 MT at $194.75, just $0.10 lower than DFT’s offer price.

It is critical for the contracted volume to be shipped within the month because the NFA stocks could fall below 30 days by July 1 if the volume is not bought soon.

An NFA source said the state-run grains trading agency decided to let DTI head the ongoing negotiations because the agency’s hands are tied.

"We have to follow the bidding rules which ensures that what should be accepted as the price for volumes contracted outside the bidding process should be the lowest bid price, this should be the basis for awarding the contract. DTI has more flexibility to conduct negotiations because government can still negotiate or haggle for a lower or better price,"the source said.

The 200,000 MT of rice due from Thailand is part of the concession package Manila granted to Bangkok in exchange for the former’s retention of higher tariff rates on imported sugar.

The Philippines and Thailand are close to completing negotiations for a bilateral agreement that will allow the Philippines to maintain the 50 to 56 percent tariff on imported sugar, and even possibly raise this to as high as 80 percent.

Bangkok wanted the concession package to include the importation by Manila of at least 200,000 MT of rice from Thailand. The volume will be bought by the NFA.

Thailand, a major rice exporter is a steady supplier of the country’s rice import requirements. Aside from being a big rice exporter, Thailand is also a leading sugar producer in the region.

NFA Administrator Arthur Yap said earlier that both governments should come up with a pricing mechanism for rice that should be favorable to the Philippines.

He added the final volume to be imported by NFA will be bought under the minimum access volume (MAV) scheme which is the minimum volume of agricultural products that a country is obliged to allow into its market under the World Trade Organization (WTO). Under the MAV schedule, the rice import volume allowed for this year is 207,000 MT. Rice bought under the MAV is slapped a 50 percent tariff while the tariff for volumes outside the MAV is 100 percent.

Under the Association of Southeast Asian Nations Free Trade-Common Effective Preferential Treatment, the Philippines committed sugar as one of the commodities whose tariff will be lowered to zero percent to give percent from the current 50 to 60 percent.

The Philippines however, was able to persuade the AFTA council of which Thailand is a member, to defer the reduction of sugar tariffs to 2010 because the local sugar industry is unprepared to open up the domestic market.