President Benigno Aquino has approved a proposal to import more rice this year, government sources said, in a move to avert a potential spike in food price inflation due to forecast El Nino affected dry weather conditions.
Fresh buying by the Philippines, one of the world’s biggest rice importers, could help support rice export prices in Asia, which have fallen in recent months because of weak demand.
The final terms of the increased imports, which normally specify the amount and variety, are still subject to approval by the National Food Authority (NFA) Council headed by Food Security Chief Francis Pangilinan, the two sources said.
The Philippine government last week revised down its estimate of first-half domestic rice production, with dry weather already affecting more than half of the country’s 81 provinces.
The sources declined to disclose the volume of additional imports, although industry sources have said the Philippines may buy up to 310,000 tonnes more this year, with shipments expected before the lean harvest season starting July.
The Southeast Asian nation recently bought 500,000 tonnes via government-to-government deals with key sellers Vietnam and Thailand, and regional supplies remain abundant.
Thailand, the world’s second-biggest rice exporter after India, has said its plans to sell 2 million tonnes of rice over the next two months from stockpiles built up under the previous administration’s failed buying program.
In Vietnam, the world’s third-largest exporter where prices have weakened this week on a lack of buying demand, a new crop harvest will begin from around late June, traders said.
FOOD INFLATION IN FOCUS
A dramatic rise in retail rice prices in the Philippines last year after damage to supply chains from Super Typhoon Haiyan pushed food price inflation to the highest in more than five years.
Economic Planning Secretary Arsenio Balisacan said in March that the government must guard against future food price spikes, which had driven up the country’s poverty rate.
The El Nino phenomenon, a warming of sea-surface temperatures in the Pacific, can lead to scorching weather across Asia and east Africa and is almost certain to last through the Northern Hemisphere summer, the U.S. weather forecaster has said.
A significant El Nino would put the Philippines’ headline inflation well over the 2-4 percent target by 2016, which could put the central bank under pressure to raise interest rates sooner than expected, HSBC economists said this month.
“We now expect two rate hikes in 1Q and 2Q (next year), but food inflation risks could bring this into late 2015,” HSBC said.
