Looking ahead: Rice shortage in 2010?

MANILA, Philippines – For the world’s biggest rice importer, will 2010 be another 2008, a year plagued with skyrocketing rice prices amid squeezed supply?

Past experiences have led the Philippine government to ensure that retail cost of this staple is affordable and supply assured. These issues determined the political careers of previous national leaders.

While 2009 was supposed to be a year when these issues were laid to rest, events beyond any government’s control distressed laid out plans. Storms battered the country, submerging key agricultural areas. Rice paddies that were supposed to provide stocks for the first quarter of 2010 became useless.

The agriculture department has estimated that the Philippines lost some 1.3 million metric tons of paddy rice (or 850,000 metric tons of milled rice) as recent typhoons damaged the country’s key rice-producing areas.

At the tail-end of 2009, the Philippines rushed to the world market to plug its supply gap at home. As expected, the trading price for rice in the world market also climbed.

For 2010, research groups are looking at a global rice shortage, as well as higher prices for the crop.

Rice deficit

In a report, London-based research company Business Monitor International (BMI) is expecting a global rice deficit of 6.7 million tons in 2010 from its previously anticipated balance.

“The world’s largest rice importer [ Philippines ] has recently begun to ramp up imports. We now project a global rice deficit of 6.7 million tons in 2010,” BMI said in the Asia edition of its Global Macro Monitor.

HSBC Global Research, for its part, noted that rice prices have risen more than 25% in recent months as higher demand from the Philippines and India have caused fears of a supply shortage next year.

Aside from the Philippines and India , other Asian countries said to be at risk of higher rice prices are Sri Lanka , Indonesia , Thailand , and Vietnam .

“The Philippines , easily one of the largest global rice importers, had severe production shortages due to typhoon damage and has started to place record tenders to prevent a squeeze next year,” the group said in its recent report.

So far, the government has accessed future rice imports that are less than it had targeted.

The National Food Authority (NFA) recently announced that it will buy 586,554.37 tons of rice from its third and last tender on December 15, slightly less than the 600,000 it sought to purchase.

Last week, the government was only able to buy 474,272.70 metric tons of imported rice out of the 600,000 metric tons it bidded out in its December 8 tender due to higher rice prices in the international market.

On top of these is the government’s purchase of 509,950 metric tons of rice last December 1, lower than the originally planned batch of 600,000 metric tons.

So far, the Philippines has bought 1.23 million metric tons of rice, with the government planning to buy as much as 400,000 metric tons of rice through a reorder scheme provided by the procurement law.

Imports as government’s last resort?

Agriculture Secretary Arthur Yap has earlier reiterated that the Philippines will continue to focus on buying local crops, saying that importation will be the government’s last resort.

To encourage local farmers to boost production and increase profitability, he said that the National Food Authority (NFA), the country’s state grain agency, should raise rice prices as dictated by the market instead of giving subsidies.

“We should get the NFA to start moving prices up (instead of giving subsidies). Let’s leave the market alone,” Yap said at the 35th Philippine Business Conference and Expo held recently.

The NFA has been selling rice to poor families in the Philippines at P18.25 per kilo, significantly lower than commercial rice prices. According to Yap , rice subsidies “distort the market” by pressuring farmgate prices.

“Our primary mandate at the Department of Agriculture is to ensure farmgate growth. The poor is the responsibility of the Department of Social Welfare and Development (DSWD),” he said.

To make up for higher prices of subsidized rice, Yap said the government can provide cash handouts to poor families already identified with the DSWD.

Diversify food security

Instead of placing too much focus on rice investments, University of Asia and the Pacific Dean of the School of Management Dr. Rolando Dy has earlier said that the government should diversify the Philippines’ food sources.

This, he said, will provide more food options for Filipinos, maximize farmlands, sustain the environment, and boost the country’s resources for export development.

“We should diversify food security. Rice uses a lot of water. Let’s develop dryland crops. Think of saba banana, cassava, gabi, squash, and corn,” Dy said at the 35th Philippine Business Conference and Expo held recently.

“Think of lower carbon footprints if rural communities are food self-sufficient in other carbo sources. Think of agri-diversification that leads to agro-industries and off-farmland non-road jobs,” he added. abs-cbnNEWS.com, with reports from Reuters, Business Mirror, and The Sunday Times