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Philippines Agribusiness Report Q4 2009
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Philippines |
Published |
11 August 2009 |
Number of Pages |
61 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
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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