Philippines’ goal not to import rice may harm world market: ADB

Self-sufficiency could cause price volatility in the intl. rice market - ADB

 

MANILA, Philippines – The Philippines’ goal of attaining rice self-sufficiency in 2013 year may cause harm to the international rice market and cause price shocks, according to a working paper released by the Asian Development Bank (ADB).

If this happens, this would be the second time the Philippines affects global rice prices in recent history after being cited as one of the main reasons for the world rice price crisis in 2008.

In a paper released on Thursday, August 30, the Manila-based multilateral institution noted that the Philippines is one of the 3 biggest rice importers in the world. The other top global importers are Nigeria and Indonesia.

“Net importing countries have pursued self-sufficiency in rice that is likely to insure them against the risk of trade disruptions. However, the self-sufficiency strategy raises the cost of rice security in the region,” the ADB said in paper titled “Enhancing ASEAN’s Resiliency to Extreme Rice Price Volatility.”

Regional rice index

Meantime, the ADB recommended that rice importing countries lower their self-sufficiency targets in exchange for commitments from exporting countries to stay away from unilateral export restrictions.

Further, in another paper titled “Commodities Exchange: Options for Addressing Price Risk and Volatility in Rice,” the ADB said that to calm world rice price volatility, Asian countries could establish a regional rice index and commodities exchange.

The ADB suggested financial instruments, like futures and options, could be traded on existing commodities exchanges in Hong Kong, China, or Singapore.

“Top exporters such as India, Thailand, and Vietnam could also establish domestic commodities exchanges, allowing farmers to obtain a better price by selling their most popular local rice grades directly on the market, rather than through a middleman,” the paper read.

The road to rice self-sufficiency 

The local price of rice, the most politically sensitive among crops in the Philippines, rose close to 40% in 2008, when global supply was threatened, exposing the vulnerability of the Philippines to the world market.

The Arroyo government’s moves then to secure deals with Vietnam, a rice exporter, sent world prices soaring.

The Aquino government has since pursued a rice self-sufficiency policy, which has a timetable as follows:

NO MORE IMPORTS. This is the country's Rice self-sufficiency plan. This graph was taken from the Govt's Food Staples Sufficiency Program Report.

The Philippines has been citing the self-sufficiency program in rice and overall growth in the crops subsector as the main growth drivers in attaining agriculture growth of 4.3% to 5.3% in the medium term.

Agriculture Secretary Proceso J. Alcala has remained firm on efforts to attain 100% rice self sufficiency. He said the government has enough funds to spend for its self sufficiency bid.

The Philippines imported 500,000 MT of milled rice for 2012. Alcala said it is possible that the country will import “a minimal volume” of milled rice next year.

The DA is optimistic that it can produce 20.04 million metric tons (MMT) of palay and 8.75 MMT of corn in 2013 with a bigger budget approved by the Department of Budget and Management (DBM).

During a recent hearing on the DA’s budget for next year, Agriculture Secretary Proceso J. Alcala said the P74.1 billlion being proposed by the department to Congress will boost its efforts to produce more staples. – Rappler.com


Read the full text of the working papers here: Adb Wp 23 Enhancing Aseans Resiliency Rice Volatility Adb Wp 25 Commodities Exchange

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