New Philippine president to face early test over food security

By Enrico Dela Cruz MANILA (Reuters) - While Philippine elections this month were dominated by talk about crushing crime, the next president faces another critical early test: ensuring there is enough rice for the country's more than 100 million people. The Philippine crop is suffering mounting drought damage, just as the country's big Asian rice suppliers also suffer from an El Nino weather pattern. In a country where rice accounts for about a quarter of the expenditure of the poor, any supply disruptions are extremely sensitive. Big purchases by the world's third-biggest importer can also send shockwaves through markets. There are now concerns that potentially vital imports may be delayed as the incoming administration of Rodrigo Duterte, who campaigned on making food available and affordable, looks to overhaul policies and review existing state purchase plans. "Now is the right time to import as prices are starting to trend up," said Bruce Tolentino, deputy director general for communication at the International Rice Research Institute (IRRI). In 2008, lower Asian rice output also due to an El Nino prompted India to ban exports, sparking panic measures in the Philippines - including ordering troops to supervise subsidized rice sales and asking fast food chains to serve half-portions. Manila also had to scramble to import more rice in 2014 after prices shot up due to typhoon crop damage. On May 13, Duterte's campaign spokesman Peter Lavina said an April plan to allow the state buyer to import an additional 500,000 tonnes this year would be reviewed and the administration would immediately talk to Vietnam, Thailand and Cambodia on new deals. Lavina said the aim was to make the country self-sufficient in rice within one to two years, but would still allow imports until this was achieved. Duterte's choice for agriculture minister, Emmanuel Pinol, has said the administration will bar private traders from importing rice and put the task entirely in the hands of the state grains agency, the National Food Authority (NFA), a move that some traders say could stall imports. "Many traders were expecting the Philippines to make the large 500,000 tonnes purchase shortly after approval was received, but no deals have happened, and this is really adding some intrigue to the market," said James Fell, an economist at the International Grains Council in London. NFA spokesman Angel Imperial said there was no urgent need to import given ample stocks. April stocks can meet 99 days of consumption, up from March's 87 days, after the delayed arrival of some rice imported last year. Nonetheless, there are concerns that time is running out for deals to safeguard stocks in the lean harvest season beginning in July as the new government will not officially take office until the end of June. "It will create supply problems if they don't buy until the end of June," said a Singapore-based trader, who declined to be named as he was not authorized to speak to media. RICE HARVEST SHRINKING Local rice prices have largely been stable in recent months, after authorities aggressively boosted state reserves following price spikes in 2014. But the first-quarter rice harvest shrank nearly 10 percent from a year earlier to 3.9 million tonnes. "Some of the NFA's imported stocks are more than six months old so there's also a need for them to immediately unload and then replenish," said Jaime Magbanua, president of the Grains Retailers Confederation of the Philippines. While an El Nino is now weakening, farm officials have warned of more crop damage later in the year when La Nina, the counterpart of El Nino, could develop and bring intense rains. "WATCHING THE PHILIPPINES" With no import deals yet this year, the Philippines may need to boost 2016 imports to a six-year high of 2 million tonnes, based on U.S. Department of Agriculture (USDA) forecasts. That is as much as 300,000 tonnes higher than the NFA's initial 2016 import estimate. It also comes as countries such as Indonesia and Iran are increasing purchases and world rice production is forecast to decline for the first time since 2010. Thai rice prices hit a two-year high last week and have boosted prices in Vietnam, the main supplier to the Philippines. "Everybody is watching the Philippines' moves in the open market, which could trigger panic among buyers," IRRI's Tolentino said. (Additional reporting by Naveen Thukral in SINGAPORE; Editing by Ed Davies)