Posted on June, 10, 2022 at 10:24 am
Why is the Philippines extending the 35% tariff level for rice imports from India (from the original 50%) until end-2022?
The move was made through an executive order that lowers the tariff rate for rice imported from outside Southeast Asia.
What triggered the move? A number of reasons, but primarily three: inflation, lower yields, impending price hikes.
In the last two decades, the FAO Rice Price Index (a measure of the monthly change in international rice prices), doubled between the year 2000 and 2020.
Recently, Philippine inflation spiked to 3-year high as the country’s central bank reported that it accelerated to 5.4 per cent in May — the highest since December 2018 — owing to higher transport cost.
Lower yields due to climate, economic and geopolitical factors also form part of the reason. Rice is the daily staple of the country’s more than 109.6 million inhabitants (and also of about 3.5 billion people globally).
As for cartelisation, Thailand and Vietnam have both announced plans to set up a rice supplier group. On May 30, Thailand’s government spokesperson Thanakorn Wangboonkongchana, said Bangkok and Hanoi planned to hike the prices of the grain to double farmers’ income and obtain bargaining power in the international market.
Thanakorn said that one reasons behind the plan is that food grain prices have been flat for almost 2 decades now even as the production cost has increased.
Southeast Asia accounts for 40 per cent of the world’s rice exports.
Indian rice stays highly competitive in the global market — its 25% broken white rice was quotes at $342 per tonne over the weekend, according to the International Grains Council (IGC).
The price slid further to $327/tonne on June 8. On the other hand, Vietnam quotes $421 for its 5% broken white rice and Thailand $449 for the same grade.
The move to keep the tariff cuts could give Philippine consumers a breather from rising inflation.
This also gives Indian producers a good chance to boost exports.
M Madan Prakash, President of Agri Commodity Exporters Association was quoted as saying: “Rice exports from India are booming now. We are quoting at least $100 a tonne less than Vietnam and Thailand. China, Vietnam, and the Philippines are purchasing good volumes.”
He added: “The government in Manila is looking for government-to-government exports since private traders importing rice are selling it at a higher price.”
Rice is the main food crop in Asia — which includes the world’s two largest producers, China and India, and the three largest exporters, [India, Vietnam and Thailand].
But as rising demand of the tiny seed hangs in the balance amid environmental challenges, Asean’s rice bowl economy faces new challenges.
Among the world’s food staples, the amount of rice available for export trade is among the lowest — typically under 10 per cent of global production each year.
The reason: rice is mostly consumed where it is produced, according to Paul Teng, senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies in Singapore. A shortfall in production could affect the rice security of millions.
The Philippines suffers from underinvestment in agriculture and is frequented by strong typhoons, making it vulnerable to supply shortfalls.
In April, with record rainfall, flood alerts were up in at least 6 Philippine regions comprising more than 20 provinces, due to a low-pressure area (LPA) at the tail-end of the so-called “La Niña” phenomenon, which dumped heavy rains on several regions in the country’s east and south-east.
A March report in the journal Nature warned that Southeast Asia’s “rice bowl” status is under “severe threat”.
The yield gaps are increasing when farmers are only able to obtain about half the yields they should get from their seeds, the journal reported.
To narrow yield gaps, the study warns of the urgency for Southeast Asia rice producers to take action “now”, in order for the region remain a major rice bowl for import-dependent countries like Singapore, Indonesia and the Philippines.
Then there’s the bigger picture: the UN Food and Agriculture Organisation (FAO) has warned that rice production must increase by 5 million tonnes per year to keep up with demand from increasing populations.
This poses a challenge due to continuing reduction of rice lands, industrial and urbanisation use, declining freshwater resources and farm labour pose hurdles.
India is the world’s largest rice exporter, accounting for about 40 per cent of global exports. In 2021, rice shipments from the India topped 21.3 million tonnes, including Basmati rice.
The Philippines imposes a 50 percent duty on rice imports from non-Asean countries, thus giving a most preferred nation (MFN) status to its two Asean neighbours. Given Manila’s recent move, this preferential treatment won't holding for now, at least till the end of the year.
Source: Gulf News