Wednesday, 9 April 2008

U.S. Pledges Rice to Philippines as Price Near Record (Update1)

By Francisco Alcuaz Jr. and Glenys Sim
Bloomberg
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTfiso9MvrpQ&refer=home

April 9 (Bloomberg) -- The U.S. vowed to supply the Philippines with as much rice as the world's biggest buyer of the cereal needs after some of the largest exporters cut sales to safeguard domestic stockpiles.

"You are assured absolutely," Kristie Kenney, ambassador to the Southeast Asian country, told reporters in Bataan province, west of Manila today. Philippine President Gloria Arroyo announced yesterday plans to purchase 1 million tons of the grain and said she would jail anyone found guilty of "stealing rice from the people."

Rice, the staple food for half the world, has doubled in price in the past year as China, Egypt, Vietnam and India, representing more than a third of global shipments, reduced sales to secure domestic supplies. The price of the cereal in Chicago rose 1.7 percent today to $20.825 per 100 pounds, below the record $21.60 per 100 pounds yesterday.

"You might see another 10 or 20 percent move to the upside," said Vijay Iyengar, Singapore-based managing director of Agrocorp International Pte., a commodity trading company. "Prices will be sustainable."

The Philippines is tightening controls over domestic sales and boosting overseas purchases to curb price rises and avoid the kind of unrest experienced by some African countries. The government plans to buy more rice at tenders in April and May.

The Southeast Asian nation may raise imports of milled rice by as much as 42 percent to 2.7 million tons this year from 1.9 million tons in 2007 to discourage speculation by local traders, Agriculture Secretary Arthur Yap said March 26.

More Shipments

U.S. rice exports, the third largest behind those of Thailand and Vietnam, were forecast to jump 22 percent to 3.58 million tons in the year ended July 31, the U.S. Department of Agriculture said March 11.

The cost of rice exports from Vietnam may rise by as much as $200 per ton to $900 in the next two months because of world price gains and the end of the winter-spring crop, Truong Van Anh, director of Long An Food Co., said by telephone from the Mekong-Delta farming region today.

Commodity prices are posting their seventh year of gains. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials more than tripled in the past six years as global demand led by China outpaced supplies of metals and crops.

Global food prices increased 57 percent last month from a year earlier, the United Nations Food and Agriculture Organization said on its Web site. The rise comes from higher meat and grain prices, including rice, corn and wheat, it noted.

Poverty, Hunger

"Food price trends are likely to increase sharply both the incidence and depth of food insecurity," John Holmes, United Nations under-secretary-general for Humanitarian Affairs, said in a speech in Dubai yesterday. "Price rises will also result in lower school attendance rates, poorer health care and asset depletion."

Soaring prices could lead to increased unrest, such as in Haiti recently, the United Nations said in a report April 7.

"What we see in Haiti is what we're seeing in many of our operations around the world -- rising prices that mean less food for the hungry," the report said, citing the United Nations World Food Program's executive director Josette Sheeran.

Burkina Faso, Cameroon, Egypt, Indonesia, Ivory Coast, Mauritania, Mozambique and Senegal have also experienced unrest in the last several weeks related to food and fuel prices, according to the report.

North Korea

Rising food prices are making life tougher in North Korea, said Daniel Pinkston, a Seoul-based senior analyst and non-proliferation expert with the International Crisis Group.

In the spring the past few years, North Korea has asked South Korea for fertilizer and food assistance and this year they have not made this request, said Pinkston.

"I think they believe this would be a sign of weakness," he said. "The sad part of this story is that ultimately the North Korean people will pay the price, so we could see a looming food crisis coming later this year."

In Thailand, the world's biggest rice exporter, hypermarket operators will lower retail prices of the cereal between 3 percent and 10 percent next week to control inflation, the Bangkok Post reported.


To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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