Are rice price offers of 2 gov’ts reasonable?
This is in reaction to the news report titled “PH gets rice supply offers” (Business, 11/27/13).
The price offers made by the governments of Vietnam and Thailand were received by the National Food Authority (NFA) at $462.50 per metric ton (mt) and $475 per mt, respectively, for a single contract of 500,000 mt, with partial shipments before the end of 2013. The importation was meant to raise the stocks depleted by Supertyphoon “Yolanda,” which justified the procurement (on a G2G or government-to-government basis) and saved face for agriculture officials who were not in conformity with a recent Neda board recommendation to import, prior to Yolanda, in addition to the 207,000-mt importation in April 2013, which was deemed “overpriced” at $459 (“Consumers see no respite from higher prices of rice,” Across the Nation, 11/8/13). Were the price offers reasonable? Our observations:
1. The Arthur Yap-led NFA to our recollection, priced importation on a CIF basis, and so did Lito Banayo’s NFA. With international quotes publicly known, the addition of standard cost factors—freight, insurance premium, survey fees and interest charges—it was not complicated to determine the reasonableness of Vietnam’s or Thailand’s price offers. For instance, the addition of known cost inputs to international FOB benchmarks explained the contract price of $550/mt for 1.5 million mt in a December 2008 NFA importation.
2. The adoption by the Orlan Calayag-led NFA of a “door to door” pricing scheme for the April 2013 importation or “free on warehouse” (spillage, damage, cargo-handling cost factors included in the price) has made it difficult to ascertain if a CIF or Free on Warehouse scheme is advantageous, in the absence of published actual figures on NFA losses on specific imports priced on a CIF basis. Is the NFA not in a position to manage such losses? On a CIF basis, the April 2013 purchase could have been priced at about $410 (FOB of $365) instead of $460 (“door to door”)—a meaningful difference.
3. Thailand’s and Vietnam’s price offers to the NFA represent spreads of $72 and $90 from the FOB quotes of $403 and $370, respectively, as of Nov. 13, 2013. Published every Thursday with regularity, the quotes for Nov. 20 (when the Philippines’ 500,000-mt importation was coincidentally a certainty) are not available. Only last month, specifically on Oct. 3, 2013, Vietnam’s and Thailand’s prices were quoted at $335 and $428, respectively.
With the supertyphoon and earthquake survivors as the likely beneficiaries, the NFA is urged to publish the process in arriving at a final price, which involves some P10 billion.
—MANUEL Q. BONDAD,
