Is NFA’s P17-B rice imports via bidding the best option?

The National Food Authority (NFA) appears to be duplicating history with its purchase this April 15 of 800,000 metric tons (mt) of rice via bidding among foreign state-run and private grains agencies (“Bidders sign up to supply P17-B worth of rice to PH,” Business, 4/4/14).

(To recall, in December 2010, the NFA dispensed with the much publicized negotiated G2G [government-to-government] procurement mode [600,000 mt in 2008 and 1.2 million mt in 2009], opting instead to invite bidders for the supply of some 2.2 million mt [worth $1.5 billion] in 2010. This move appeared to moderate public suspicion that G2G rice transactions were  tainted!)

Not only that, the NFA has pulled a string of surprises:

Instead of buying 25-percent broken rice, for the first time it is getting the more expensive

15-percent grade—all 800,000 mt it has put up for bidding (though excluding a possible 25-percent reorder without bidding, which the NFA invoked in the past).

If the current $20/mt price gap between the two rice grades does not widen come April 15, the NFA could save at least $16 million and thus allow the NFA to start lowering the retail prices of rice. At the NFA-budgeted $383 million for 800,000 mt (15 percent brokens), the NFA appears ready to pay $479/mt (CIF/DDU) against the present benchmark

of $375.

Have our traditional sources of the cheaper grade run out of 800,000 mt of 25-percent brokens?

At this point, the NFA has yet to prove and show that large-scale procurement via bidding is beneficial to the country. Why? In four weekly open biddings   from Nov. 4, 2009 to December 2009 for 2.3 million mt, the NFA’s procurement cost skyrocketed to the satisfaction of foreign traders—from $476/mt to $698/mt (CNF basis) against benchmark prices of $432-$487, only to settle down at $323 in April 2010.

Moreover, the NFA’s invitation to all “rice-exporting countries, even the United States” is an exercise in futility and could only motivate other traditional NFA foreign rice suppliers to up bid prices a notch below the United States’ latest available benchmark price which stood at $590 (FOB) against Thailand’s and Vietnam’s  $375, and Pakistan’s $390. How could many countries’ participation “boost the chances of getting a good deal”? (“Philippines seeks bids from exporters in at least seven countries in rice deal,” Reuters, 4/3/14)

Moreover, only one of the Philippines’ traditional supplier-nations appears to be in a position to supply the NFA’s 15-percent rice brokens. Thailand’s exports of this grade reached a maximum of only 290,000 mt in 2012. Again, all eyes and ears on the NFA

this April!

—MANUEL Q. BONDAD,

manuelbondad@yahoo.com