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March 27, 2008

Declining rice production, corruption cause Filipino rice shortfalls, price hikes

Philippine farmers warned on March 26 that the country was facing a serious rice supply crisis, as the government signed a deal to import rice from Vietnam to boost local reserves at a time of rising prices and shrinking global stocks.

The National Rice Farmers Council said the shortage could cause the price of rice — the nation's staple food — to soar to $1 per kilogram from the current average of around 60 cents per kilogram.

"The traders will definitely take advantage of the limited supply, while the government will be dependent on the imported rice for its buffer stock," said Jimmy Tadeo, the group's chairman.

The Philippines consumes about 13.1 million tons of rice annually, most of which is grown domestically. But dwindling domestic production and corruption in the rice supply chain have created a recurrent shortfall of about 10%. The government has to purchase about 2.2 million tons from the international market every year, making the Philippines the world's biggest rice importer.

The Agriculture Department says rising demand in the Middle East and Africa has increased the price of rice in Vietnam and Thailand — the world's top exporters — to up to $500 per metric ton, a 25% jump in just the last month.

Agriculture Secretary Arthur Yap said the government signed an agreement with Vietnam on Wednesday guaranteeing the supply of 1.65 million tons of rice.

The National Food Authority, the state-owned grains trading company, has so far signed contracts for 1.3 million tons of rice, mostly from Vietnam and Thailand, and an additional 110,000 tons under a loan program from the U.S. Department of Agriculture.

Yap said the government's rice reserve would last 57 days, and denied there was any shortage, "even if prices are high." A number of factors contributed to rising costs, he said, including higher fertilizer and oil prices as well as climate change.

The government plans to increase local production by planting an additional 1.5 million acres of rice during the rainy season in the country's 10 poorest provinces and another 1.2 million acres in other provinces, he said.

President Gloria Macapagal Arroyo has vowed to crack down on rice hoarders, people who buy rice at a subsidized price from the NFA and sell it at a higher price in markets. Though no charges have yet been filed, Yap was staking out warehouses and following trucks to see where the rice was going, she said.

USA Today

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