This is in reference to the news article titled “PH secures El Niño stock with Vietnam, Thai rice” (Business, 9/18/15).
For two successive years, about this time in 2008 and 2009, the NFA (National Food Authority) Council contracted to import a total of 3.775 million metric tons (mmt) of rice principally from Vietnam—1.5 mmt in December 2008 through a government-to-government (G-to-G) deal with Vietnam’s State Grains Agency at $549.50 CNF/mt, or a gross spread of $227/mt against the international benchmark of $323 FOB/mt prevailing at the time for Vietnam rice. (Published reports have it the NFA Council used $447 FOB/mt—the higher Thai benchmark at the time or a difference of $124 FOB/mt against the Vietnam rice.)
In the last quarter of 2009, another 2.275 mmt were secured at $642 CNF/mt on the average against benchmark prices averaging $413 FOB/mt, resulting in spreads duplicating the preceding year’s importation. But the similarity ends there, with a surprising switch from the World Bank-suggested G-to-G procurement mode and back to a series of public tenders during the period October-December 2009.
In early 2008, habitual rice tenders unjustifiably propelled international prices to new highs only to collapse in late May 2008. Thus the World Bank proposition. By mid 2008, unsubstantiated fears of supply shortages in this part of the world, and in late 2009, a looming scenario of El Niño and La Niña were used as justifications for NFA’s massive shipments in 2010, spaced over 12 months resulting in overstocked NFA warehouses. And publicly available records point to a significant drop in world prices after the NFA secured the contracts worth $2.3 billion (P105 billion), which amount was approved by the Department of Budget and Management. The NFA Council drastically cut rice imports to only 251 mt in 2011.
On Sept. 17, 2015, the NFA Council approved the importation of 750,000 mt of rice to cope with the El Niño phenomenon—450,000 mt (Vietnam) and 300,000 mt (Thailand) at a unified G-to-G price of $426 CNF/mt. Against the Sept. 16, 2015 international FOB reference prices of $315/mt (Vietnam rice) and $344/mt (Thailand), the gross spreads secured by NFA (attributed to ocean freight, insurance, survey fees, etc.) translate to only $99/mt in late 2015 versus $228/mt in late 2008 and 2009, or some $129/mt in savings.
In the grains agency, the numbers show outgoing President Aquino’s “straight path” footprints may have set in finally. But it was worth the long wait after all!
—MANUEL Q. BONDAD, Barangay Palanan, Makati City