Good news for rice exports – Philippines

Recently, Pakistan got an opportunity to boost exports to Iran (Read “Good news for rice exports – Iran” published on May 14, 2018 by this column). Philippines is another destination that Pakistan can supply rice to even though it is not traditional market for Pakistan and in fact, Pakistani rice exports to Philippines have dwindled in recent years. Some background information is in order.

Once, about a decade ago, Philippines used to be world’s biggest rice importer, importing nearly $2 billion worth of rice in 2008, as per ITC. However, even at its peak of imports, Pakistan was not an important supplier of rice to the country. As Philippines moved towards self-sufficiency in rice production, its overall import numbers and Pakistan’s export declined.

Since the country is mountainous, consisting of many small islands, suitable land for rice production is limited and hence it still imports more than a million tons of rice a year, as per United States Department of Agriculture (USDA). To become self-sufficient in rice, Philippines limits rice imports through quotas at a volume identified by its National Food Authority to prioritize buying from local farmers. This arrangement not only limits rice supply but also boosts domestic prices— as high as twice that of world prices in 2016.

Currently, Philippines is facing a five-year high inflation rate of above 4 percent. At nearly 10 percent, rice is the second-biggest component in the Philippine consumer basket. As domestic supply of rice dwindles, its price is at a three-year high adding to the inflationary pressure and prompting the country to increase imports.

Traditionally, Philippines imports from its fellow ASEAN members Thailand and Vietnam, followed by Pakistan. Though TDAP and REAP have sent trade delegations to boost rice exports, overall Pakistan has faced a declining trend, though it recovered growth in the last fiscal year.

This year Pakistan has a window to increase its market share in the country. Last month, Philippine’s National Food Authority opened a bid for 250,000 MT of rice at a government-to-government level with Thailand and Vietnam. However, these prices were not taken up by Thai and Vietnamese exporters.

The prices were further tweaked and opened for biding anew this month with no limitations regarding the volume of rice that one bidder can supply to the country. Among the 16 foreign bidders looking to bag the contract, one was a company from Pakistan.

The prices that were considered too low by Vietnamese and Thai traders were $483/MT for 50,000 MT of 15 percent broken rice and $474/MT for 200,000 of 25 percent broken grains. The prices quoted by the ASEAN exporters were above $500/MT. As per PBS data, on average Pakistan’s non-basmati variety was exported at $410/MT with total rice averaging at $477/MT this year. Therefore it is possible that Pakistan can bag the contract for Philippines rice imports.

Furthermore, this is not the only opportunity to export to Philippines this year. NFA is looking to import more rice in 2018 since even with the latest import order; this supply is only expected to last for about two weeks in the rice loving nation of Philippines. With Pakistan eyeing $27 billion in exports for the next fiscal year, supplying traditional exports to non-traditional markets may be one practical way to achieve the target.