Rice Crisis Monitor 7
- RP at most risk on rice crisis (Manila Times)
- Rice crisis to push inflation up to 8% in Philippines (Xinhua)
- Global food crisis looms as Asia’s rice bowl empties and world price soars (Scotsman News)
- Global food crisis looms as Asia’s rice bowl empties and world price soars
- Philippines fails to contract expected amount of rice
Saturday, April 19, 2008
RP at most risk on rice crisis
Palace calls for calm as prices continue to rise
By Chino S. Leyco, Reporter
The Philippine economy is at the most risk among Southeast Asian countries as prices of the country’s staple food—rice—are seen to further rise in the coming months, UBS Investment Research warned Friday.
Edward Teather, UBS economist, said the rise in rice prices may have been triggered by major exporting countries, such as Thailand and Vietnam, curtailing supply. “It [price rise] is also part of a broader trend within grain and hence food prices,” he added.
Teather said the world’s largest rice producers are seen as the biggest beneficiaries of the rise in world rice prices, now at $1,000 per metric ton.
“The per capita income level, rice import needs, and negative food trade balance probably mean the Philippines’ economy is at most risk from higher rice prices,” he added.
The government, though, is confident that it could maintain enough supply of rice despite the soaring prices in the world market. It cited its current programs that could see the Philippines pull through until the prices stabilize in the next two months or so.
Press Secretary Ignacio Bunye said the public should not worry about a possible lack of rice supply in the world market. The possibility apparently arose from the cutback on rice exports by Vietnam and Thailand. These two countries have also increased the prices of the staple.
“There’s an international council that monitors grain prices and comes up with an assessment on world prices. It said prices would stabilize in the second quarter of the year. So, there is nothing to worry about,” Bunye added.
“We expect that rice prices would drop by the end of the year, and this is a good development. In the meantime, however, we will continue to carry out the measures that we have started to ensure enough supply,” he said.
The government needs to import 2.1 million metric tons of rice for this year to supplement local production of rice. It had imported some 1.1 million metric tons.
When asked about the imposition of quota by some local government units to secure their own supply of rice, Bunye said the government will stick to a strategy that it had adopted.
“Our response is three-pronged, to ensure supply, distribute rice properly, and enforce the law against hoarders to make sure no one seizes the opportunity to make money illegally,” he added.
The Philippines, with a daily consumption of rice amounting to 33,000 metric tons, imports less than 10 percent of its annual consumption of the staple food. President Gloria Arroyo has already lifted the quota for rice importations this year to counter a possible crisis. The country is considered as the world’s largest net importer of rice.
Teather said, “Because rural incomes are typically relatively low and the amount spent on staple food high, households could suffer significant real income losses here also.”
The UBS economist, meanwhile, added that the adverse effects of high rice prices could be tempered, depending on the policy response, both from the national government and the Bangko Sentral ng Pilipinas (BSP).
“Governments and central banks will likely be greatly tempted to resort to monetary accommodation where incomes are low and the burden of rising food prices on household’s income is high,” Teather said.
He added that the Philippines’ consumer purchasing power rate this year is seen to average at 6 percent and could reach close to 8 percent. In March, Bangko Sentral said inflation breached the 20-month high rate at 6.4 percent as a result of a rise in prices of commodities such as oil and rice.
“We downgrade our consumption forecast and look for no further policy rate cuts from the BSP,” Teather said. “Indeed, in the Philippines, calls for higher wage growth may pose further upside risks for inflation and policy rates.”
Policy responses have focused on ensuring supply and subsidizing incomes while central bankers sat on the sidelines.
The central bank’s Monetary Board is set to meet next week to decide whether to cut or maintain the policy rate at present.
The rise in the prices of rice has not been an isolated phenomenon, Teather said. He explained that prices of grains in general have been rising for some time relative to the price of other soft commodities and livestock.
The UBS economist said the rice situation at present is a kaleidoscope of long-term and temporary developments.
“There is good reason to believe that the arrival of the rice crop in Brazil, Uruguay, Bangladesh, India, Indonesia and Thailand in the coming months will ease price pressures. And there are hopes that this crop will be relatively bountiful,” Teather said.
High rice prices could cost the government, through the National Food Authority, at least P20 billion for rice procurement abroad.
The food agency sells its rice at P18.25 per kilo, significantly lower compared with commercial rice whose retail prices range from P31 per kilo to P41 a kilo.
Last year, it said, it incurred a net revenue loss of P7.25 billion.
Under the apparently tight rice supply, soldiers will be able to avail of National Food Authority rice at a cheaper price, P18 per kilo. They will also get bread, also at cheaper prices (a loaf at P36 and seven pieces of pan de sal, or the common man’s bread, at P11).
The cheaper rice and bread can be bought at all commissaries, the President announced also on Friday during the first fellowship meeting of the Association of Generals and Flag Officers in Camp Aguinaldo, Quezon City.
“Our first obligation and commitment is to put food on the table in the Philippines. Rice is a global issue and has deeply impacted the Philippines. We are taking strong, swift decisive action to make sure it doesn’t become a crisis, with a singular focus on mitigating price to the best of our ability,” Mrs. Arroyo said in her speech.
Armed Forces chief Hemogenes Esperon Jr., who was at the meeting, said the commissaries will be used as distribution outlets for government’s subsidized rice and bread for soldiers and war veterans and their dependents.
He added that the items will also be made available to civilians who are relatives of those who have commissary privileges.
The goods, Esperon said, will be available nationwide. Their distribution, though, will be subject to availability of supply.
During the meeting, the President thanked her hosts for standing by the Constitution and the rule of law.
“With your support, I remain bullish on our economy, optimistic about our future, and deeply committed to being a force for good,” Mrs. Arroyo said.
Also present in the gathering were national police chief Avelino Razon Jr., Defense Secretary Gilbert Teodoro, National Security Adviser Norberto Gonzales, and Executive Secretary Eduardo Ermita, himself a retired general.
There, too, were retired generals and association officers led by their president Jaime Echeverria, vice chairman Rosalino Solquillo, treasurer Oscar Cabaron, auditor Quintin Alcudia, executive director Ismael Musico, and directors Felix Brawner Jr., Romulo Cabantac, Angel Kanapi, Jose Lapus, Rodolfo Rabago, Federico Ruiz Jr., Restituto Padilla and Eriberto Varona.
— With Angelo S. Samonte and Jefferson Antiporda
Rice crisis to push inflation up to 8% in Philippines
MANILA, April 18 (Xinhua) — The Philippines will suffer a hard-hit by the global soaring rice prices, which might push the country ‘s inflation to a record 8 percent, well above the government’s 3.0-5.0 inflation prediction for 2008, USB, one of the world’s leading financial firms said in a research report on Friday.
In its latest report, UBS Investment Research said compared with other Southeast Asian economies the Philippine economy “is at most risk” from higher food prices for its over dependence on imports and the fact that rice is an irreplaceable staple for 88 million Filipinos.
UBS said the global food prices escalation has forced it to raise the 2008 CPI inflation forecasts for the Philippines, Thailand, Malaysia and Singapore in the region, with the Philippines leading the group with a 1.4 percentage points upward adjustment.
“In the Philippines, the CPI (Consumer Price Index) rice component is more closely related to available daily price data for Manila–which suggests CPI inflation rates close to 8 percent in coming months,” UBS said, adding that the headline inflation for the Philippines is likely to exceed 6 percent on average for the year 2008.
In the Southeast Asia, the Philippines has the highest food share in its consumption basket, pegged at 50.03 out of 100 price index basket weights, the report says.
UPS said the CPI inflation is expected to take a steep rise as the government cannot dictate the commercial retail rice price.
As one of the world’s top rice importers, the Philippines expected to buy not less than 2.2 million metric tons of foreign rice in 2008. It has purchased about 1.2 million metric tons so far but failed to secure another 500,000 metric tons for April-June delivery on a Thursday’s bidding.
Only 325,750 metric tons of rice were offered at prices ranging from 872.5 U.S. dollars to 1,220 U.S. dollars per metric ton, more than double the price at this January’s bidding.
To ensure rice remains affordable to almost 3 million poverty-stricken Filipinos, the government has invested a swelling amount to keep the subsidized rice be sold at an unchanged price of 18.25pesos per kilogram (0.45 U.S. dollars). Commercial rice sold at free market have seen prices rising up to around 40 pesos (0.97 U.S. dollars per kilogram.
UBS said the cost for the Philippine government to buy higher prices of foreign rice and insist selling it at lower prices domestically would potentially cost not less than 43 billion pesos(1.05 billion U.S. dollars), or 0.6 percent of the GDP (Gross Domestic Products) for this year.
Editor: Sun Yunlong
Global food crisis looms as Asia’s rice bowl empties and world price soars
By Raju Gopalakrishnan in Manila
THE crisis over rice showed no signs of easing yesterday as the price of the world’s benchmark jumped 10 per cent in just one week, fanning fears that millions across Asia will struggle to afford their staple food.
In a clear sign of the strain on output after major exporters began to curb exports earlier this year, a tender from the Philippines, the world’s top importer, attracted offers to sell only about two-thirds of the half a million tonnes it sought.
In Bangkok, Thai 100 per cent B grade white rice, considered the world’s benchmark, hit $950 (£482) per tonne, three times its price at the start of 2007.
“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, the chairman of Sunrice, a major Australian rice producer, said.
Increased food demand from rapidly developing countries, such as China and India, the use of biofuels, high oil prices, global stocks at 25-year lows and market speculation are all blamed for pushing prices of staples such as rice to record highs around the globe.
The unprecedented surge, which some analysts said is going to continue, posed a growing threat to regional governments worried about the prospect of hoarding and social unrest.
Governments in top producer countries, such as Thailand and the No2 exporter, Vietnam, are urging farmers to grow extra crops, although it will be several months before the additional supply hits the market.
Meanwhile, demand from other big importers, such as Iran, which is expected to try to buy up to one million tonnes of Thai rice this year, will keep the upward pressure on prices.
The Philippines is the hardest hit of the Asian nations in the current crisis – although secretive North Korea is likely to be in a worse position.
As a measure of the seriousness of the problem, Manila has temporarily halted conversion of agricultural land for property development, hoping to ring-fence paddy fields to meet the food needs of the country’s 88 million people.
Soldiers guard sales of subsidised rice by the state National Food Authority, and the government has filed charges against 13 people suspected of hoarding.
The global turmoil is such that the US secretary of state, Condoleezza Rice, yesterday said the United States hopes to announce fresh steps to alleviate food shortages around the globe. “The rapid rise in global food prices is an urgent concern,” she said.
Soaring rice prices have come as fears about tight world supplies led governments to hoard and ignited protests in places like Haiti, where five died in food riots last week.
“You’ve been drawing down the world stocks since 2000. You’re down to the bottom of the barrel,” said Ed Taylor, an analyst with Firstgrain.com.
The US government projects world stocks of rice to be 77 million tonnes by 1 August, the start of the new marketing year. That is up slightly on a year ago, based on projections for a five million tonne rise in world production. But world stocks will still be 48 per cent below 2000.
This season’s world production could also still be hurt by the weather, leaving countries in need of imports at a time when many countries are already holding back on exports. India and Vietnam have banned exports.
India shut off the supply valve in October, when it banned exports of non-basmati rice to its Asian neighbours. Thailand stepped in to fill the gap, but soon found that it, too, was running short of rice.
In times of grain shortages, the world typically turns to the US, but US rice stocks have been cut in half the past two years. Rice acreage is being diverted to soaring corn, wheat and soybeans.
In 2007, the US produced only about six million tonnes of rice, out of total world production of 425 million tonnes.
“It’s just a drop in the bucket,” Mr Taylor said. “We don’t have anywhere near enough quantity to bale anybody out.”
Bob Papanos, the head of The Rice Trader, a weekly rice marketing publication, underscored the point. “We’ve had declining stocks, declining stocks-to-use ratios for the last 15 years,” he said. “It all came together and slapped the world in the face.”
The United Nations’ World Food Programme said on Tuesday that the price it pays for rice to supply food donations jumped to $780 a tonne from about $460 a tonne at the beginning of March – just after it made an emergency appeal for an extra $500 million.
Rice could be even more volatile, since governments in many nations – including across Asia’s “rice bowl” – consider rice a national security priority.
What makes rice supply/demand special is that almost all of the crop is consumed where it is grown.
Only 6 per cent of world rice is exported, compared with 17 per cent for wheat, the other main food grain.
VIETNAM is among the better placed Asian countries – it is at least able to supply its own domestic needs.
But the world’s third-largest exporter of rice has already imposed a 22 per cent cut in the amount of the crop it is willing to put on world markets – thus making life more difficult for its traditional customers, such as the Philippines.
Farmers in Vietnam say they have planted a special variety of rice for their summer crop, hoping that 7.8 million tons will hit the international market in mid-June, a month earlier than normal.
This rush to feed the market is not particularly a humanitarian one – with prices as high as they are, a Vietnamese farmer can make a good profit, enough to send a child to university or improve their agricultural equipment.
THE Philippines is the world’s biggest importer of rice and has been most exposed to a leap in international prices.
“I do not see any food riots in the Philippines,” the defence secretary, Gilberto Teodoro, told reporters this week. “We don’t see any immediate threats to national security, whether caused by this rice crisis or otherwise.”
The president, Gloria Macapagal Arroyo, said an action plan to prevent rice shortages includes securing rice imports, proper distribution and cracking down on hoarders and price manipulators. The government has temporarily halted the conversion of agricultural lands for development, amid concerns it needs to ring-fence its paddy fields to meet a growing demand for rice.
Unmilled rice production in the Philippines is expected to reach 17 million tonnes this year, from 16.24 million tonnes in 2007, but the increase in output is not enough to keep pace with rapid popul
ation growth, one of the highest in the region.
INDONESIA, the world’s most populous Muslim country, has said it expects to be able to feed its more than 230 million people this year. Yet it is not unaffected by the rise in rice prices – inflation, related to the global price surge is hitting all manner of consumer products.
This week Indonesia became the latest country to impose controls on rice exports.
BANGLADESH is one of Asia’s most overpopulated countries and one of the the poorest. It is particularly vulnerable to rises in the price of its staple, rice.
Hundreds of poor families are now surviving on one meal a day, and spending 70-80 per cent of their budget on food.
More than half a million Bangladeshi troops were yesterday ordered to eat potatoes in an attempt to ease the impact of surging prices.
The full article contains 1275 words and appears in The Scotsman newspaper.
Last Updated: 17 April 2008 10:22 PM
Philippines fails to contract expected amount of rice
MANILA, April 17 (Xinhua) — The Philippines failed to secure the expected 500,000 metric tons of rice from international bidders in Thursday’s rice tender, the third in the year held to hedge against a rice supply shortage evolving into a serious national crisis.
Only 325,750 metric tons of rice was offered at prices ranging from 872.5 U.S. dollars to 1,220 U.S. dollars per metric ton, the national television network GMA News said.
It quoted Ludovico Jarina, deputy head of the National Food Authority (NFA), the government’s importing arm, as saying that the bidding prices exceeded the agency’s expectation of 900 U.S. dollars per metric ton in maximum.
As one of the world’s top rice importers, the Philippines expected to buy not less than 2.2 million metric tons of rice overseas to feed its people in 2008. It has purchased about 1.2 million metric tons at a cost of 626 million U.S. dollars due to soaring grain prices in the global market.
Half of the contracted amount has arrived while 90,000 metric tons are on the way, Philippine President Gloria Macapagal-Arroyo told the public in a Tuesday’s address, saying that the rice supply “is secure for the foreseeable future.”
Thursday’s contracted amount is set for April to June delivery while the government is planning another tender on May 2.
Credit Suisse, the Swiss-based investment bank, predicted the Philippines would spend up to one percent of GDP to deal with the rice crisis this year because the government vowed to maintain the price of subsidized rice sold in domestic market unchanged at 18.25 pesos per kilogram (0.445 U.S. dollars) despite the price of imported rice that almost doubled since the start of the year.
Editor: Bi Mingxin