By Rene Pastor

The Philippines, one of the world’s biggest rice importers, will not hit a highly touted government target to become self-sufficient in rice in 2013 because of strong consumption of the staple food of its 95 million people, while damage from typhoon Bopha (Pablo) to its main corn farms on southern Mindanao island will force the country to increase corn imports by 85 percent in 2013.

A report by the U.S. agriculture attaché at the U.S. embassy in Manila said that despite increased rice output, ballooning demand will force the country to import 1.5 million metric tons of rice, the same amount it imported in 2012.

The report added that severe damage from Bopha (Pablo), which hammered Mindanao in December 2012, will force imports of corn, used mainly as livestock feed in the country, to jump 85 percent in 2013 to 185,000 metric tons.

Attaché reports are compiled by U.S. agricultural experts in its embassies even if they are not considered official data issued by the U.S. Agriculture Department. But they are considered as highly reliable by industry experts and the commodity trading community.

The attaché said damage from typhoon Bopha was even more severe than the government has admitted. The Philippine Agriculture Department said 35,000 hectares of corn farms and 28,000 hectares of rice lands on southern Mindanao island were damaged, resulting in corn losses of 77,000 metric tons and 17,000 tons of rice.

“(The USDA attaché) post estimates corn losses as a result of the typhoon at 135,000 tons, almost double the preliminary (Philippine government) estimate,” the report said.

“In addition, an estimated 20,000 tons of milled rice stocks were spoiled due to the typhoon. Rice imports in marketing year 2012/13 (August/July) are expected to remain at 1.5 million tons due to good production, while corn imports were raised by 85,000 tons and expected to reach 185,000 tons during the year,” the attaché report concluded.

Philippine milled rice production in 2012 hit around 11.5 to 12 million tons and Manila has waxed optimistic output could spike higher this year and make it self-sufficient in the cereal.

Philippine rice stocks are also seen in the attaché report as dropping to very low levels, which traders feel could again be a factor in forcing or pressuring Manila to consider rice imports.

“As a matter of government policy, a 90-day national rice buffer stock entering the third quarter of each year should be maintained,” the report said. “At an estimated national daily rice requirement of 34,000 tons, ending rice stocks in marketing year 2012/13 would be sufficient for around 40 days.”

By Rene Pastor

President Benigno Aquino used the platform of the Davos World Economic Forum in Switzerland to declare the Philippines’ drive for self-sufficiency may turn one of the world’s top importers of rice into an exporter of the staple. But he left an out: If Manila fails to hit the target, there’s always bad weather to blame.

“From importing almost two and a half million metric tons of rice in 2010, now, if the weather permits, we are looking at full rice self-sufficiency—and even the possibility of exporting it—by the end of this year,” Aquino said.

The reality is that bad weather is a given in the Philippines. The country gets hit by an average of 20 typhoons a year and most plow into the islands before heading off for Vietnam and China. Early in the typhoon season, the storms would clip the northern islands and then smash into Taiwan or Japan.

Simply put, the odds in the Philippines are on bad weather, not good.

The Philippines is relying on increased investments in irrigation systems and the wider use of GMO rice to boost productivity. Yearly milled rice output by the Philippines is expected to rise beyond 12 million tons and hopefully get to 13 million tons.

Philippine annual milled rice consumption now stands at 13 million tons. With mid-term congressional elections in May and an expanding, more affluent population, the consumption figures can only rise.

“Despite the cutbacks in harvest area and production during the fourth quarter of the year, the significant increment in Luzon was able to offset the output losses due to damages by typhoon Pablo (Bopha) in Mindanao. An increase in palay (unmilled) production is foreseen in the first half of 2013,” the government’s Bureau of Agricultural Statistics said in a report.

The Philippines is also hemmed in by the amount of land it can plant to rice, currently around 4.69 million hectares, and dwarfed considerably when compared to Vietnam’s 7.41 million hectares and Thailand’s 10.25 million hectares.

These numbers are the primary reason why independent analysts and the Digest believe rice imports of around 1.0 to 1.5 million tons are still likely this year. (See previous stories on this issue)

The self-sufficiency mantra adopted by Aquino and his administration has also become a matter of pride and politics.

The Philippine government would want to claim credit for finally achieving self-sufficiency in the staple food of the country’s 95 million people. Politically, that would go down well with Filipino voters going to the polls in May.
The Digest believes the target, even if hit, will not be sustainable given limitations of population and arable land sown. We are not even throwing in the challenges posed by climate change into the mix.


The Philippines, the second most populous country in Southeast Asia, is now the 9th largest market in the world for U.S. agricultural exports as it cracked the top 10 for the first time in 45 years, a report by the U.S. agriculture attaché said.

U.S. agriculture export sales to the Philippines rose 10 percent in 2012 to $2.3 billion and are seen hitting $2.5 billion in 2013, the report said.

Attaché reports are put together by U.S. agriculture experts at its embassies but are not official data from the U.S. Agriculture Department. They are considered as authoritative by the commodity trading community.

“All indications are for continued strong growth in 2013, (with export sales) currently forecast to reach $2.5 billion,” the report prepared by William Verzani and approved by Philip Schull said.

“A thriving economy, a booming food processing sector, a strengthening peso, and dominant market shares in milling wheat (at virtually 100 percent) and soybean meal (at 60 percent compared to 43 percent in 2011) made the Philippines the 9th largest U.S. market in this vibrant sector through October 2012,” the report said.

The top 10 U.S. agricultural exports to Manila in order of value were wheat, soybean meal, dairy products, red meats (fresh, chilled, and frozen), poultry meat, feeds and fodders, snack foods, processed fruits and vegetables, fresh fruits and red meats (prepared and preserved).

“The U.S. continues to the Philippines’ number one supplier of agricultural products,” the attaché report said.

“However, competition has greatly intensified and new challenges have emerged for U.S. exporters due to recent bilateral and regional free trade agreements.”

In wheat, the U.S. is still the primary source of the grain for the country of nearly 100 million people. U.S. wheat is the primary ingredient in the ‘pan de sal’ bread used by millions as part of their breakfast staple.

Australia, which enjoys cheaper shipping costs to Manila, has emerged as a competitor for U.S wheat.

The attaché report said “good sales opportunities” for U.S. agricultural exporters abound “because of the robust Philippine economy, steady growth in the country’s retail, food service and food processing sectors, and consumer familiarity with American brands.”

The Philippines posted the fastest economic growth within the ASEAN region of Southeast Asia through the third quarter of 2012.

Most economists said two factors were fueling the economic growth. They are remittances by the 10 million Filipinos working outside the country and the business outsourcing center inside the nation. The attaché report said the World Bank projected remittances to the Philippines will hit $24 billion in 2012, up 20 percent from the previous year, making the country the world’s third-largest recipient of money sent by overseas workers. The country’s business process outsourcing (BPO) sector expects profits to reach $14 billion in 2012, up 28 percent from the previous year.

By Jack Scoville, The Price Futures Group

It looks like grains and oilseeds futures here in Chicago topped out for the minute. The rally in response to the USDA reports has run its course and prices are now correcting lower. However, this should be just a short-term correction.

The factors that caused USDA to raise demand and cut ending stocks have not gone away. Demand for U.S. grains and soybeans is there, although hard to find for corn on the weekly exports announced by USDA.

But wheat export demand is picking up, and the corn export demand, meager as it is, is more or less in line with USDA projections. Soybeans demand remains well ahead of USDA projections for this time of year.

So there is no reason to expect that prices will go down too much for now. Most eyes are turning south as traders try to gauge what will be coming out of South America and when, as this will have a big effect on the U.S.’s ability to export and hold strong prices together.

The situation is far from great down there. Brazil has had better weather, but it keeps raining in the central and northern sections of the country. Crops there are getting ready to be harvested, and many parts of the Mato Grosso are ready for harvest.

But the rains keep the equipment out of the yields and nothing gets done. Many had anticipated that Brazil could begin to export in February, but this is going to be hard now. It is too hard for the farmers to get the crop harvested, then into condition to be shipped, then on a truck to the port, then through the port system and onto boats for shipment on time now.

There are boats in ports now to take 2.0 million tons of soybeans, and only part of that will be shipped. The wait is now estimated at 45 days. Not to mention corn exports. It is going to be hard for anyone to get anything out of Brazil before March, and the soybeans will flow first even with very strong corn demand there.

The wait for corn is just as long as the wait for soybeans. All this does is keep the window of opportunity open for U.S. exporters for at least another month. it implies that bull spreads should continue to work in corn and especially soybeans. That means you can expect the front months to hold stronger than deferred months in Chicago at least into the spring and summer.

Wheat should continue to see a stronger export sales pace for the next few months as we have it here and most other exporters do not. Our prices are pretty competitive anywhere, and our quality is generally good this year, so the demand should increase over the next few weeks as it
has for the past few weeks.

Meanwhile, crop conditions in the U.S. central and southern Great Plains remain poor. Production potential is going down for us, and will really start to slide if the region does not get some very beneficial precipitation in the next few weeks as the crop starts to come out of dormancy.

That could make things very interesting, even if Europe and Russia come up with good crops. The weather has been mixed there, with some very cold conditions in Europe making for some winterkill potential, but better conditions than last year in Russia.

Conditions are good in the U.S. for the Midwest soft red winter wheat crop. But half the production of U.S. wheat — that is all of the hard red winter wheat crop — is under some pretty severe stress right now, and overall U.S. wheat production will be impacted.

In rice, the Gulf of Mexico region is about out, and this means that the millers better be bought. Demand out of California for medium and short grain has been poor so far this year but is expected to improve as Korea and Japan move to fulfill their quota deals.

Seasonally, it is a time of higher prices for just about all of the grains and oilseeds grown here in the U.S. Buyers should use the price weakness to ensure supplies at least through the first quarter and possibly into the middle of the summer.

By Jack Scoville

Palm oil had a slow week last week due in part to some public holidays in top producer Malaysia. Prices traded in a sideways fashion in cash and futures markets last week.
The private sources reported that exports so far this month are behind those of last month, but are still strong at over 1.0 million tons from Malaysia with several days left in the month.

Traders remain cautious about demand as China remains a problem with its new quality standards. However, Chinese officials and buyers are in Malaysia now explaining the new requirements and how to work with them to the exporters, so there is every chance that exports can start again to that important buyer in the near future and perhaps after the Chinese New Year which is coming very soon now.

Production remains very strong in Malaysia and also in No. 2 producer Indonesia right now, so supplies are going to be there for the buyers. This is the good news.

The other good news is that India increased import taxes a couple of weeks ago, but did so for all vegetable oils, so palm oil will continue to enjoy a significant price advantage to that important buyer and the exports will continue to flow to there.

Big supplies and good demand usually mean moderate prices, so we expect palm oil to continue to trade in the current range as the big stocks reported in both Malaysia and Indonesia are reduced.

Prices can start to rally once the stockpiles have been reduced, but this will most likely take some time. Production is reported as strong even though it is usually a time of year when production starts to drop a bit.

Longer term, we hold with our ideas that prices can work higher rather than lower over time and hold to the targets made last week. But this week could see some selling as futures failed in an attempt to move higher last week.

Like the expected action in Chicago, we expect any down moves to be short-lived and not likely to go very far. It could turn out to be a great chance to buy for those short in this market.

For now, we see no reason to extend coverage beyond what is normal for buyers, nor do we see reason for sellers to get real aggressive. Normal purchases and sales paces should be maintained.


Philippine corn production in calendar 2012 hit a record 7.41 million metric tons, but a string of late typhoons could hit output in 2013, the country’s agriculture department said.

The use of improved seeds, irrigation and fertilizers boosted output by 6.25 percent from the 2011 level of 6.97 million tons, a statement from the Department said.

“Corn production may decline compared to the 2012 level as some areas have yet to recover from damages brought by typhoons,” a report from the Bureau of Agricultural Statistics explained.

With that prospect of lower output in mind, analysts believe the Philippines will likely refrain from exporting corn despite a bumper harvest last year.

Philippine corn growers had asked permission from the government to export from 200,000 to 400,000 tons of corn to take advantage of higher world prices caused by the worst drought in 25 years which hit crops, such as corn, in the U.S. Midwest.

The higher Philippine corn production was caused mainly by an increase in harvested area caused by higher farmgate prices.

Corn harvested area stood at 2.59 million hectares, almost 2 percent up on last year’s 2.54 million hectares. Philippine corn yields increased over 4 percent to 2.86 tons per hectare, from 2.74 tons in 2011.

Corn and rice are staples in the central and southern Philippines. It is also used heavily as livestock feed.


Indonesia’s commodity logistics agency Bulog said the most populous country in Southeast Asia has enough stocks of rice for its 200 million people.

Bulog president and director Sutarto Alimoeso said rice has been stockpiled in anticipation of extreme weather conditions. He said the rice they have stashed away is enough for eight months.
“The ideal rice stocks should be those that would meet a three-month need, but we…are able to meet the need for eight months,” the Bulog official said. He expressed the hope that weather conditions would not become so extreme as to cause difficulties in distributing logistics and preventing drastic price increases.

Indonesia is the third biggest rice producer in the world, according to the research agency International Rice Research Institute. Most of the rice is grown on the main island of Java.

The country is also the 4th most populous in the world and has the most people in Southeast Asia.

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