Abstract
Despite the large 2009 rice crop, it is looking increasingly likely that rice
imports for the year will once
again breach the 2mn tonne mark. Demand for
the grain has stayed strong despite the slowdown in
economic growth as
consumers have cut out more expensive foods such as meat. The National
Food
Authority (NFA) admitted in July that rice imports could potentially
even surpass the record 2.3mn
tonnes imported in 2008, though we do not
think this is likely.
Most of the year' s rice exports have come from a
huge government-to-government deal struck with
Vietnam back in January for
the import of 1.5mn tonnes of rice. At the beginning of Q309, the deal
jumped back to the top of the nation' s headlines when Reuters published a
report claiming that the
Philippines had paid up to 45% more than the
market price for the rice when the deal was made. The
Philippines
Department of Agriculture rushed to refute suggestions that it paid too much
for the rice.
Despite this, there is now a definite cloud over the deal,
which at the time looked like a prudent move to
make sure the scramble for
supplies seen in 2008 was avoided.
With the status of the nation' s rice
supply is such an emotive issue in the Philippines, we doubt the last
has
been heard of this story. There are likely to be more calls for a public
investigation into the deal. The
news is sure to mean that any future
deals of such a large magnitude will come under far closer scrutiny.
This
is to be welcomed to a point. Crops sold through such large
government-to-government deals are
often subject to a price premium with
the buyer paying extra for the security of knowing the nation' s food
supplies are covered. While close scrutiny in large procurements will help
make sure the government gets
the best deal and prevent any suggestions of
corruption, if future deals are subject to too much
interference and
political point scoring, the country' s food supplies could be put in
jeopardy.
There is also controversy brewing with the Philippines' other
major grain crop, corn. In July 2009, AFP
reported that South Korea' s
Jeonnam Feedstock had signed a contract to lease a 95,000 hectare (ha)
plot
of land in Oriental Mindoro province. The company is reportedly
hoping to grow corn to feed South
Korea' s livestock sector. The company
said that it wants to begin production on a 1,000ha test plot as
early as
this year. The move is part of a growing trend of rich food deficit countries,
led by the Gulf states
and South Korea, buying up agricultural land in
poorer countries with the aim of increasing their food
security.
With
the Philippines itself a major food importer - though it is often
self-sufficient in corn - any such deal
is bound to be controversial. When
the news broke, the national and provincial authorities in the
Philippines
rushed to deny any knowledge of the deal. The Department of Agriculture said
that any such
deal would have to be done in partnership with a domestic
company and permission for exports would
need to be granted by the NFA.
When considering whether to approve such a deal, the authorities need to
make sure that it will be beneficial to the wider agricultural sector. We
generally welcome wholeheartedly
overseas investment in agriculture as an
important source of capital and technology transfer. However, a
large
intensive project with all the product aimed for the export market such as
this could easily see the
benefits accrue mainly to the foreign investor,
local politicians and a few select businessmen rather than
benefitting the
country as a whole.
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