Right price, best terms

MANILA, Philippines - I shall react to the article of Mr. Federico Pascual in the April 14 issue of The STAR, by merely reciting facts.

The National Food Authority signed a government-to-government deal for 200,000 metric tons of well-milled rice with Vietnam Southern Foods Corporation, a government corporation mandated by the Socialist Republic of Vietnam to trade with the Philippines by virtue of a Memorandum of Agreement signed between our two nations. That Memorandum of Agreement on food security, signed by our Secretary Proceso Alcala of the Department of Agriculture, and the Minister of Commerce of their country on December 30, 2010, extends by three years an earlier agreement forged between our two countries in 2007 which expired last year.

We purchased these 200,000 tons, which is a mere 9 percent of the volume bought by the previous administration, at $480 per metric ton, freight included, and with a 270-day payment term which begins upon our acceptance of the goods in Philippine ports. Since the shipments of the rice will commence only in May, NFA shall begin paying in 2012, a relief considering the humongous P177 billion debt we inherited from the previous dispensation.

The minimum export price posted in the Vietnam market at the time of the purchase was $490 per ton, FOB, Ho Chi Minh. The FOB wholesale price in Vietnam, also posted in the website, was $445, FOB. The Thai Board of Trade quotation for the same rice quality, FOB, was $470. Surely, paying $480 nine months after receipt of goods (with interest rates going up), freight charges included (at a time when the whole world is experiencing oil price surges), is not only reasonable, but extremely fair, when placed side-by-side with the FOB benchmarks which any enterprising person can check in the internet.

Now let me compare; In November 2009, the previous government bought an initial 250,000 metric tons, from the same source, at $480, under the same terms. Check the posted prices at the time of purchase. Vietnam was quoting $419, FOB. But that is not yet the whole story. $419 towards the end of 2009, as against $445 in late February 2010. And the purchase price, CFR 270 days, was the same at $480.

Through successive tenders, which one of PhilSTAR’s business columnists, a recognized business leader, described recently as “quirky bidding”, the price was pushed from $480 up to as high as $695, all in the breathtaking space of 33 days. At the end of those 33 days, the Philippine government had contracted 2,250,000 metric tons of well-milled rice at an average price of $630 per ton under the same terms and conditions as our purchase of 200,000 tons at $480 per. Go figure the spreads between FOB and CFR, nine months to pay — then and now. In fine, our purchase price was $150 per ton lower.

Mr. Pascual may want to compare the price which the Philippines under President Aquino, and this letter-writer purchased our first and recent imports, with that of neighboring countries, whether from Vietnam or Thailand. The figures are available in the websites of these countries, as well as international trade reports. We assure him and the PhilSTAR that we have every reason to state the fact that the Philippines bought lower.

Was I in Vietnam recently? Is September 2010 recent? The result of that visit is the Memorandum of Agreement on food security between our countries, likewise discussed by our President and their Prime Minister in the APEC Summit in Hanoi in late October last year.

Was I in Cambodia recently? Yes, February 16 and 17 this year, to be exact, at the invitation of the Cambodian government, for official talks with their Minister of Economics and Finance and Deputy Prime Minister, and other high officials. No less than the former president, Fidel V. Ramos, incidentally, chairs the Philippine-Cambodia bilateral cooperation association, and along with President Benigno S. Aquino III, is interested in strengthening trade and business relations between our countries. House Speaker Feliciano Belmonte at the request of Cambodian Prime Minister also asked the NFA to establish close ties with Cambodia.

I look forward to the day when through the efforts of our Secretary of Agriculture, the country can achieve self-sufficiency in our staple cereal. That is just around the corner, 2013, and the summer crop this year, currently being harvested and estimated to be a bumper crop, is most re-assuring.

Meanwhile, the NFA is mandated by law to ensure the availability of enough rice to fill the gap between consumption requirements and domestic production, and we shall always seek the right price at the best terms and conditions, for whatever we purchase from any foreign country.

Thank you for printing our side. With every best wish, I remain.