RP ready to buy rice, but no sellers

MANILA, Philippines – The government is ready to buy rice, but rice-producing countries are becoming less inclined to sell as the staple’s price continues to surge in the world market.

The country received yesterday limited offers against its tender to import rice as prices went up 25 percent higher than last month, adding worries to the government already battling food inflation.

Traders offered only 325,750 tons of rice against the import tender for half a million tons, with prices ranging from $872.50 to $1,220 per ton cost and freight, bid documents showed.

The latest tender by the Philippines, now the world’s biggest rice importer, was for 400,000 tons of the 25 percent broken variety, 50,000 tons of 15 percent broken, and 50,000 tons of five percent broken.

The National Food Authority (NFA) said bids came in for 290,750 tons of 25 percent broken variety and 35,000 tons of five percent broken. There were no bids for the 15 percent broken variety.

It was the third consecutive rice import tender in the Philippines that has been unable to secure the full amount in bids.

Prices, meanwhile, have soared from an average of $474.71 per ton in January.

“We feel the price is really high,” said Ludovico Jarina, NFA deputy administrator after the opening of bids at yesterday’s tender.

At the close of the bidding, Jarina jokingly asked the bidders, “Are you sure you are offering rice?”

The NFA said it will have to seriously decide if it will raise its selling price for rice, following the almost 50 percent increase in bids in yesterday’s rice tender which also failed to attract the 500,000 metric tons (MT) that the grains agency had hoped to fill.

The rice would come from Vietnam, Thailand, Pakistan, and even the United States. The rice would arrive in May and June this year.

The NFA has allotted P15.7 billion to buy an additional 500,000 MT.

Jarina said the awards committee will take five days to study the bid offers before deciding to accept all or reject some of the bids.

In last March’s tender, bids ranged from a low of P618.50 to a high of P747.

Jarina said that the awards committee would check the spot market to compare the bids offered yesterday as well as assess world market prices.

Jarina also refused to reveal if the NFA would hold an additional bidding to secure the volume it still requires.

The NFA has already scheduled another bidding for May 5 for 500,000 MT, which should be the last to complete the NFA’s target purchase of 2.1 million MT for this year.

The NFA has already secured 1.1 million MT.

However, with the shortfall in yesterday’s bidding, Jarina indicated the possibility of another tender “until we are able to fill up the 2.1 million MT.”

Even so, Jarina stressed that the government continues to explore other options to secure additional rice for the country, possibly through the East Asia Rice Reserve (EARR) of the US Government’s GSM 102 program.

The Philippines, Jarina said, is hoping to secure at least 15,000 MT under the EARR.

As for the US grains assistance under the GSM program, Ludovico said that the country may only secure 72,000 MT under the $75-million loan program.

A tender had already been held in the US with an NFA official overseeing the process.

The Philippines, Ludovico said, is still actually studying if it has to avail of the full loan amount of $75 million to purchase rice or purchase just the 72,000 MT and pay for the freight cost.

Freight cost alone, Jarina said, is around $218 to $280 per metric ton.

The US rice is expected to arrive between June and September this year.

With imported rice prices now hitting more than $1,000, the cost of rice would result in a price of P48 per kilo at zero tariff.

If the NFA maintains its current selling price of P18.25 per kilo, the NFA would incur a tremendous loss.

The NFA is also draining its resources by its decision to offer a P6 incentive per kilo on top of the regular NFA palay buying price of P11 per kilo.

Jarina clarified that the reported P17 per kilo palay buying price is due to the P6 incentive and technically, the NFA buying price is still P11 per kilo.

He assured that even though the NFA is increasing its purchase of imported rice, the government is also encouraging farmers to continue planting.

While the government has to accept an even higher level of loss at the NFA, it will have to seriously consider up to what level of loss it can handle before the country’s fiscal health is affected.

No sign of easing

In Thailand, the sense of crisis over rice showed no signs of easing yesterday as the price of the world’s benchmark jumped 10 percent in just one week, fanning fears that millions across Asia will struggle to afford their staple food.

In Bangkok, Thai 100 percent B grade white rice, considered the world’s benchmark, hit $950 per ton, free on board, three times its price at the start of 2007.

US rice futures also surged 2 percent on the Chicago Board of Trade to a record high for the third straight session.

“There’s been a popular misconception that the world can produce as much food as it likes. Well, it obviously can’t. And Asia can’t feed itself at the moment,” Gerry Lawson, chairman of major Australian rice producer Sunrice, told Reuters.

The unprecedented surge, which some analysts said is only going to continue, posed a growing threat to regional governments worried about the prospect of hoarding and social unrest.

Policy makers are grappling with the impact on inflation of the soaring cost of food, which is combining with oil prices at record levels of $115 a barrel.