Gov’t to save on rice imports with a strong peso

The strong peso is helping the government save dollars on its rice importations even as rice prices in the global market are increasing.

"The strengthening of the peso means lower cost for our rice importations and should the situation prevail, it will ease the burden of government to be shelling out more foreign currency for its rice purchases. This is a positive factor for us especially if world market prices of rice continues its steady rise," said National Food Authority (NFA) Administrator Gregorio Tan Jr.

Tan explained that NFA currently pegs its rice purchases at P52 to the dollar or P3 lower than the previous peg of P55 to the dollar.

This has reduced NFA’s buying price by four to five percent. Thus, despite rising rice prices in the world market, the government has achieved a net gain of at least one percent, added Tan.

Non-government organizations and rice farmers fear that the perked up peso will encourage the government to further increase its rice purchases abroad this year and depress domestic rice prices.

"The government’s economic managers are harping on the strong peso-against-the-dollar trend as a positive economic outlook. On the other hand, this could have negative effects on the rice farmers with the possibility of an importation extravaganza of rice, taking advantage of the low cost of imported rice due to weak dollar standing against the peso," said Jessica R. Cantos, lead convenor of the Rice Watch and Action Network (R1), Cantos noted that the relatively high prices of rice in the global market worked against the strong peso.

"But had it been low, combined with the peso’s strength, we could probably see a flood of imported rice already," said Cantos Tan. She said the NFA in fact, decided to defer the third tranche of its scheduled rice imports for the first semester.

The NFA has programmed rice imports of up to 875,000 metric tons (MT) in the first semester which should all come in at end-May in preparation for the lean season So far, it has awarded to Vietnamese and Thai suppliers 350,000 MT and bid out last month 400,000 MT.

It has also offered to re-order additional volume of 75,000 MT from its previous suppliers. Under its rice import rules, NFA can request from its suppliers, a re-order of 25 percent of its original volume bought and get it at the awarded price.

This would mean substantial savings for NFA because its buying price will be based on the old price instead of the current market price. The initial volume of 350,000 MT was bought at $274 per MT while current prices range $284-$288 per MT.

"We are still awaiting our suppliers‚ response," said Tan. Tan said holding off the third tranche of this semester’s rice imports will stay until the agency evaluates the results of the rice production survey of the Bureau of Agricultural Statistics (BAS).