BusinessWorld | By Leilani M. Gallardo | October 14, 2002 Major rice-importing countries such as the Philippines are expected to incur additional costs in procuring their rice requirements once top rice-producing countries start implementing a floor price on their exports.
Representatives from top rice producing countries such as Thailand, India, China, Pakistan and Vietnam met in Bangkok last week and formed the Council on Rice Trade Cooperation (CRTC). The CRTC aims to maintain rice export prices at "remunerative levels" to protect farmers' interests. A floor price marginally above the cost of production for the five countries' rice exports will be set by the council. University of the Philippines economist and former agriculture undersecretary Arsenio M. Balisacan told BusinessWorld the move will adversely affect the Philippines as it will result in higher costs for government's rice subsidy program.
"The world market for rice is very thin and small and manipulation of supply by these five countries could have a significant impact on rice prices. Assuming that they are successful in controlling prices, we will be adversely affected," he said.
The Philippines is one of the world's top five rice importers. It bought 1.14 million MT of milled rice this year to offset a domestic shortage.
But Mr. Balisacan said he doubts the CRTC's aim will take off due to the difficulty of manipulating rice supply.
"Rice is perishable and cannot be stored for a long time. It is also very expensive to store palay (unmilled rice) because you need to have a cooling facility. There was an earlier attempt by Vietnam and Thailand to do that but it failed because no one wants to take on the burden and cost of storage."
He also said that there maybe difficulty in setting the floor price since the five countries are currently competing among themselves to increase their market share in international rice trade.
In another interview, University of Asia and the Pacific economist Rolando Dy said the establishment of the CRTC may benefit the international rice industry in the long run since it will increase the income of rice farmers and possibly result in higher production.
But Mr. Dy was also doubtful that the price-setting mechanism will work since other rice-producing countries which are not members of the group- such as the United States and Australia - could serve as a balancing mechanism.
"If prices of rice in the world market will increase, rice-importing countries could look for other sources and that could serve as an automatic stabilizer for the price," he said.BusinessWorld:
