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Philippines May Cut Rice Imports as Stockpiles Rot, Food Agency Debt Rises
The Philippines, the world’s biggest rice buyer, may be forced to cut imports as the state food buyer sinks deeper into debt and the country’s stockpiles of the grain rot in warehouses.
The National Food Authority won’t be able to pay its debts, the authority’s administrator Lito Banayo, who assumed the position this month, said in Manila yesterday. “Gross mismanagement” has seen that debt balloon to more than 170 billion pesos ($3.7 billion) this year, from 45 billion pesos in 2005, after the agency boosted imports, Finance Secretary Cesar Purisima said.
Rice futures in Chicago slumped as much as 4.2 percent to $9.745 per 100 pounds yesterday, before closing at $10.01. Prices surged to an all-time high of $25.07 per 100 pounds in 2008 as the Philippine increased imports to a record amid concerns about a global food shortage. Futures reached last year’s high of $16.27 in December as the country advanced purchases to another peak after storms damaged crops.
Meanwhile, rice stockpiles are rotting because the government failed to sell inventory bought when prices were at the record in 2008, Banayo said. “It’s so rotten, even the pigs would reject it,” he said.
The government may reduce the agency’s rice import budget and “slow down” its activities because of its surging liabilities, Purisima said.
National Food sold 9 billion pesos of 10-year bonds at a rate of 6.375 percent annually in an October 2009 auction.
Storage Full
“Within the year, we’re not going to import; those we contracted last year are still arriving and we don’t even have a place for those shipments,” Banayo said. The country must keep its import plans and details of its supply-and-demand balance “as much as possible to ourselves so that we will be able to navigate towards the highs and the lows,” he said.
The reduction in imports may coincide with a second consecutive year of weather-damaged harvests. The Department of Agriculture on May 17 reported rice production in the country may decline by a more-than-estimated 902,000 metric tons in the first nine months of the year. Output through September will drop 8.3 percent to 9.994 million tons, down from 10.896 million tons a year earlier, as dry weather caused by El Nino parched crops, the agency said.
The Southeast Asian nation may return to the market if the La Nina weather event, which can produce higher-than-average rainfall in parts of Asia, damages the next harvest, Agriculture Secretary Proceso Alcala said on July 9.
The Philippines may have as much as 60 percent more rainfall in the fourth quarter than average, potentially wreaking similar damage on crops caused by storms last year, Prisco Nilo, administrator of the Philippine Atmospheric Geophysical and Astronomical Services Administration, said in a July 5 interview.
To contact the reporter on this story: Cecilia Yap in Manila at cyap19@bloomberg.net; Joel Guinto in Manila at jguinto1@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net.
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