Current – Indian threat?

by Alex Roldan

After  months of quiet trade, rice is again receiving attention as the Department of Agriculture, through the National Food Authority, is dashing to issue tenders for the early purchase of more than 2.9 million tons of rice from our neighboring countries. particularly Thailand and Vietnam. Thailand, which is our major supplier, has anticipated that, because of floods and repeated typhoons, the Philippines would need about 2.4 million tons of rice next year, but was reportedly amazed at the speed that the DA issued those tenders. The deals to purchase for the country’s total rice requirement for next year could be completed before this year ends.
The authorities pointed to our likely importation competitors who could push the world price of  rice higher once they start buying from the international market. And that happens to be India which, like the Philippines, also suffered from both drought and floods. Rice is a staple food of  half the world’s population, and trade plays a vital role in meeting consumer needs. While only 7 percent of world rice production is traded, that increases to 12 percent when China and India, the number one and two producers and consumers, are excluded from the calculation.
DA/NFA insist that we have to purchase now while the price is still within the $500 dollar mark. Once India starts buying, nobody would want a repeat of what happened in 2008. Given that rice is a staple food and consumption has been increasing rapidly, the government may not risk having rice stocks decline. That would be disastrous. knowing that a large portion of rice farms in the Philippines has been affected by recent calamities, and no one can accurately project the country’s production next year. The authorities make it appear that the issue of food security is fast becoming very evident.
Over the last three years, the Philippines has been the world’s largest rice importer averaging 2.1 MMT per year. Earlier projections for this year put imports at a record high of 2.4 MMT, however, it was recently changed to 2.9 MMT. Production in the Philippines has averaged 10.3 MMT per year over the past three years, and the current crop was estimated at 10.7 MMT in early October. Consumption has averaged 13.0 MMT over the past three years, but has grown from 10.4 MMT in 2004/05 to a projected 14.0 MMT in 2009/10. Carryover stocks were estimated at 4.1 MMT in 2008/09 and are expected to be drawn down to 3.2 MMT at the end of 2009/10, down from the recent high of 5.3 MMT in 2005/06.
Though I am not a cynic, it puzzles me why the hurry to dispose of all the money to import rice? Is the world rice supply shortage imminent? Is the Indian threat real?
Reports reveal that Thailand, the world’s largest exporter, projected an export volume for 2009/10 at 10.0 MMT, equal to its record exports in 2007/08. Vietnam, on the other hand, is projected to export at least 5.5 MMT, just off its 2008/09 record. Pakistan’s rice exports are expected to be 3.3 MMT, up from 3.0 MMT for each of the last two years and off its recent high of 3.6 MMT in 2005/06. Exports by the U.S. are projected at 3.1 MMT for 2009/10, just under last year and the second lowest in the last six years. U.S. and Thai carryover stocks are expected to be up 0.5 MMT and 0.4 MMT, respectively, indicating they could export more if needed. Thailand has large government stocks of 7.0 MMT that could be released to the market to make room for another anticipated record harvest and meet the extra export demand. Vietnam also had a record large 2009 crop and could increase exports to record highs. In fact, recently Thailand was reported to have issued a guarantee to export to the Philippines at least 1MMT every year for the next three years!
Estimates in the market put Indian rice imports at 1.0 to 3.5 MMT; India normally imports no rice or only insignificant amounts. Though Indian rice prices have increased 70 percent this year as the short monsoon season and then floods have reduced this year’s crop, their government would import rice just to keep food costs down.
Note that the top end of the Indian import range is higher than the three-year average imports of 2.1 MMT by the Philippines and anticipated 2009/10 imports of 2.9 MMT. As was true in the first half of 2008, rice supplies are adequate to meet the additional demand if other importers and exporters do not alter traditional buying and selling patterns.
Now, why the hurry? As early as 2007, the authorities knew that the country’s rice supply was already near bottom, but they did not act fast. They did not do what was necessary, until the situation reached its peak, thus the Philippines was forced to import at more than $1,000 per MT or almost P50.00/kilo FOB! Are their actions now lessons learned from the past? Or do the decision makers realize that their time is almost up and they have to scrape up every cent in the coffers before they leave office?
Maybe, I am just cynical. 
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