The Role of SCF in Rice The Role of SCF in Rice Procurement and Storage Procurement and Storage

Policy: the Philippine Policy: the Philippine casecase

Celia M. Reyes and Christian MinaCelia M. Reyes and Christian Mina

Presented during the Orientation Forum on Climate Concepts and Presented during the Orientation Forum on Climate Concepts and Seasonal Climate Forecasts for Decisionmakers in Agriculture, Seasonal Climate Forecasts for Decisionmakers in Agriculture,

December 1, 2005, Malaybalay, Bukidnon.December 1, 2005, Malaybalay, Bukidnon.

OutlineOutline

Objectives of the StudyObjectives of the Study Rice policy of the governmentRice policy of the government Production of Rice Production of Rice Procurement of RiceProcurement of Rice Storage and Distribution of RiceStorage and Distribution of Rice Decision pointsDecision points

Objectives of the studyObjectives of the study

1.1. Explore the link between SCF and Explore the link between SCF and grain storage policy and evaluate its grain storage policy and evaluate its impact in terms of efficient grain impact in terms of efficient grain storage and pricing decisions at the storage and pricing decisions at the national and local levels.national and local levels.

2.2. Analyze the impact of ENSO on the Analyze the impact of ENSO on the price and regional supply of rice price and regional supply of rice purchased by the Philippines, given purchased by the Philippines, given that ENSO has an impact across Asia. that ENSO has an impact across Asia.

Importance of riceImportance of rice

Staple food of about 80% of Staple food of about 80% of FilipinosFilipinos

Major item in the consumption Major item in the consumption basket of consumers (13% weight basket of consumers (13% weight in the consumer price index)in the consumer price index)

Major source of income for Major source of income for millions of Filipino farmersmillions of Filipino farmers

Involvement of Involvement of GovernmentGovernment Supply and distribution aspects of Supply and distribution aspects of

rice to ensure consumers of a rice to ensure consumers of a sufficient and stable supply of rice sufficient and stable supply of rice at low prices and to maintain at low prices and to maintain reasonable returns to rice farmers reasonable returns to rice farmers through adequate price incentives through adequate price incentives

National Food National Food Authority (NFA)Authority (NFA) Sets the support price for palay (P10.50 Sets the support price for palay (P10.50

per kilo of palay or P16.15 per kilo of per kilo of palay or P16.15 per kilo of rice)rice)

Sells rice to consumers at P16.50 per Sells rice to consumers at P16.50 per kilo of ricekilo of rice

Seeks to minimize seasonal price Seeks to minimize seasonal price variations in the various regions by variations in the various regions by positioning stocks throughout the positioning stocks throughout the country country

Monopolizes the importation and Monopolizes the importation and exportation of rice to influence domestic exportation of rice to influence domestic price levelsprice levels

Rice productionRice production

About 3 million hectares of land is About 3 million hectares of land is devoted to rice productiondevoted to rice production

Two croppingsTwo croppings– Main harvest comes in September, Main harvest comes in September,

October, November (about 50%)October, November (about 50%)– Secondary harvest comes in March, Secondary harvest comes in March,

April, May (about 30%)April, May (about 30%)

Total paddy production 14.5 million metric tons Total paddy production 14.5 million metric tons Area harvestedArea harvested

Irrigated: 2.79 million hectaresIrrigated: 2.79 million hectares Rainfed: 1.33 million hectaresRainfed: 1.33 million hectares

Average yield (metric tons per harvested area in Average yield (metric tons per harvested area in hectare)hectare) Irrigated: 3.92Irrigated: 3.92 Rainfed: 2.66Rainfed: 2.66 All: 3.51All: 3.51

Rice Production in 2004Rice Production in 2004

Figure 1. Percentage share of top 10 rice-Figure 1. Percentage share of top 10 rice-producing provinces in the Philippines, 2004producing provinces in the Philippines, 2004

CagayanCagayan 3.94 3.94

IsabelaIsabela 7.33 7.33

PangasinanPangasinan 5.58 5.58

Nueva EcijaNueva Ecija 7.78 7.78

TarlacTarlac 3.31 3.31

Camarines SurCamarines Sur 3.46 3.46

LeyteLeyte 2.882.88

IloiloIloilo 5.72 5.72

Negros OccidentalNegros Occidental 2.65 2.65

North CotabatoNorth Cotabato 2.88 2.88

0

950

1,900

2,850

3,800

4,750

5,700

6,650

7,600

8,550

9,500

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ENSO Year ProductionENSO Intensities:

Weak La Niña Weak El Niño

Moderate La Niña Moderate El Niño

Strong La Niña Strong El Niño

Sources:

Volume of palay production - BAS

ENSO years – PAGASA

Note: palay converted to rice

Volume of Rice Production Volume of Rice Production (in ‘000 MT) (in ‘000 MT)

Philippines, 1980 - 2004Philippines, 1980 - 2004

ENSO IntensitiesENSO Intensities

Weak El NiWeak El Niño – SST anomaly (or deviation to threshold/normal level) is between 0.5 to 1.0 degree Celsius

Moderate El NiModerate El Niño – SST anomaly (or deviation to threshold/normal level) is between 1.0 to 1.5 degrees Celsius

Strong El NiStrong El Niño – SST anomaly (or deviation to threshold/normal level) is above 1.5 degrees Celsius

Weak La NiWeak La Niña – SST anomaly (or deviation to threshold/normal level) is between -0.5 to -1.0 degree Celsius

Moderate La NiModerate La Niña – SST anomaly (or deviation to threshold/normal level) is between -1.0 to -1.5 degrees Celsius

Strong La NiStrong La Niña – SST anomaly (or deviation to threshold/normal level) is below -1.5 degrees Celsius

Source: PAGASA, 2005

Impact of 1997-1998 El Nino Impact of 1997-1998 El Nino on rice production (percent on rice production (percent change)change)

1997199719981998

irrigatedirrigated 2.92.9 -21.2-21.2

rainfed rainfed -8.4-8.4 -32.9-32.9

allall -0.1-0.1 -24.1-24.1

IMPACTS OF ENSO ON PHILIPPINE ANNUAL IMPACTS OF ENSO ON PHILIPPINE ANNUAL RAINFALLRAINFALL

REDRED colored years arecolored years are EL NINOEL NINO years, years, BLUEBLUE colored years are colored years are LA LA NINANINA years and years and BLACKBLACK colored years are colored years are NON_ENSONON_ENSO years years

Legend: Legend:

Severe drought Severe drought impactsimpacts

Drought Drought impacts with impacts with major lossesmajor losses

Moderate Moderate drought drought impactsimpacts

Near normal to Near normal to above normal above normal conditioncondition

Way above Way above normal normal conditioncondition

Potential for Potential for flood damageflood damage

Severe flood Severe flood damagedamage

Source:PAGASASource:PAGASA

Procurement operations usually occur twice Procurement operations usually occur twice a year:a year:

Bulk of procurement occurs during the main Bulk of procurement occurs during the main harvest season (October to December).harvest season (October to December).

Procurement also happens during the Palagad Procurement also happens during the Palagad season (March to May), but only minimal since season (March to May), but only minimal since production is generally lower and prices are production is generally lower and prices are relatively higher.relatively higher.

NFA Procurement of NFA Procurement of RiceRiceDomestic ProcurementDomestic Procurement

0

950

1,900

2,850

3,800

4,750

5,700

6,650

7,600

8,550

9,500

ENSO Year Procurement Production

ENSO Intensities:

Weak La Niña Weak El Niño

Moderate La Niña Moderate El Niño

Strong La Niña Strong El Niño

Sources:

Volume of rice production - BAS

Volume of rice procurement - NFA

ENSO years – PAGASA

Note: palay converted to rice

Volume of Domestically Procured Volume of Domestically Procured Rice Rice vs. Volume of Rice Production vs. Volume of Rice Production (in ‘000 (in ‘000 MT) MT) Philippines, 1980 - 2003Philippines, 1980 - 2003

Importation is actually resorted to only during Importation is actually resorted to only during a production shortfall.a production shortfall.

The Inter-Agency Committee on Rice and Corn The Inter-Agency Committee on Rice and Corn (IACRC) meets quarterly to assess the (IACRC) meets quarterly to assess the supply/demand situation for rice and corn and supply/demand situation for rice and corn and [based on this] recommends importation [based on this] recommends importation (volume and timing), if necessary, to the DA (volume and timing), if necessary, to the DA Secretary and NFA Council.Secretary and NFA Council.

Procurement of RiceProcurement of RiceImportationImportation

In assessing the supply/demand situation In assessing the supply/demand situation for rice and corn, the following inputs are for rice and corn, the following inputs are neededneeded::

Results of the Rice and Corn Production Results of the Rice and Corn Production Survey (RCPS) conducted by the BAS every Survey (RCPS) conducted by the BAS every quarter, which include: (1) final production quarter, which include: (1) final production estimates for the last quarter; (2) production estimates for the last quarter; (2) production forecasts for the next quarter based on forecasts for the next quarter based on standing crops; and (3) production forecasts standing crops; and (3) production forecasts for the quarter after the next quarter based on for the quarter after the next quarter based on planting intentionsplanting intentions

Assessment of the NFA accomplishments, Assessment of the NFA accomplishments, which include: stock inventories, procurement which include: stock inventories, procurement volume (both domestic and international)volume (both domestic and international)

Procurement of RiceProcurement of RiceImportationImportation

Forecast of PAGASAForecast of PAGASA Other relevant information provided by Other relevant information provided by

the different IACRC member-institutions the different IACRC member-institutions such as NIA, Farmers’ Groups and DA such as NIA, Farmers’ Groups and DA ProgramsPrograms

As early as January, there must be a As early as January, there must be a final decision whether to import or not final decision whether to import or not because it takes time to conduct because it takes time to conduct negotiation for rice. negotiation for rice.

Procurement of RiceProcurement of RiceImportationImportation

If importation is finally decided, actual If importation is finally decided, actual importation happens as early as importation happens as early as February.February.

The shipment then has to start by March The shipment then has to start by March so as to avoid rainy season. Bulk of so as to avoid rainy season. Bulk of arrival of imports usually occurs during arrival of imports usually occurs during March to April.March to April.

Procurement of RiceProcurement of RiceImportationImportation

Volume of Rice Imports Volume of Rice Imports (in ‘000 (in ‘000 MT) MT) Philippines, 1980 - 2005Philippines, 1980 - 2005

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Imports

Sources:

Volume of rice imports - NFA

ENSO years - PAGASA

The food security mandate of the The food security mandate of the NFA is realized by maintaining an NFA is realized by maintaining an average of at least 15-day level average of at least 15-day level stock at any given time in all stock at any given time in all warehouses nationwide.warehouses nationwide. Given that the national average of Given that the national average of

stock requirement is good for 15 stock requirement is good for 15 days, the location-specific stocks days, the location-specific stocks vary by province according to their vary by province according to their classification:classification:

Storage of RiceStorage of Rice

Surplus Surplus (from the level of production, can (from the level of production, can still supply to private traders outside the still supply to private traders outside the province): province):

2 days2 days Self-sufficientSelf-sufficient (production is just enough for (production is just enough for

consumption): 5 daysconsumption): 5 days Less criticalLess critical (still has production but is less (still has production but is less

than the food requirement) : 15 daysthan the food requirement) : 15 days

Very criticalVery critical (has no production and totally (has no production and totally dependent on the inflow delivered by the dependent on the inflow delivered by the NFA): NFA):

30 days30 days

Storage of RiceStorage of Rice

The NFA has a total of 321 warehouses The NFA has a total of 321 warehouses distributed nationwide.distributed nationwide.

NFA already has a distribution plan even NFA already has a distribution plan even before the imports arrive so that upon before the imports arrive so that upon actual arrival, it already knows where and actual arrival, it already knows where and how much to distribute.how much to distribute.

In distribution, the NFA prioritizes those In distribution, the NFA prioritizes those provinces classified under the ‘critical’ provinces classified under the ‘critical’ areas. The surplus provinces may be areas. The surplus provinces may be allowed to run out of stocks but not the allowed to run out of stocks but not the ‘critical’ ones. ‘critical’ ones.

Distribution of RiceDistribution of Rice

OCT DEC JANNOV FEB MAR

BAS Survey

(4th round)

BAS Survey

(1st round)

National Planning Conference

Actual importatio

n

Decision to import

Main procurement period

Timeline of Activities Related to Timeline of Activities Related to RiceRice

Storage period / positioning of the stocks

Minimal procurement

(Palaga

d season)Import arrivals (target period)

APR JUN JULMAY AUG SEP

BAS Survey

(2nd round)

BAS Survey

(3rd round)

Timeline of Activities Related to Timeline of Activities Related to RiceRice

Storage period / positioning of the stocks

Minimal procurement

(Palagad season)

Import arrivals (target period)

Midyear Planning

Conference

Distribution period

Rice Stock InventoryRice Stock InventoryPhilippines, 1990-1999Philippines, 1990-1999

0800

1,6002,4003,2004,0004,8005,6006,4007,2008,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

ENSO Year Production Consumption Imports Ending Stock

Monthly Rice stock Monthly Rice stock inventoryinventory

Apr May Jun Jul Aug Sep Oct Nov Dec1 0.8 0.1 0.1 0 1.6 3.3 0.7 0.2

0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.750

0.25 0.05 -0.7 -0.7 -0.8 0.85 2.55 -0.1 -0.62.5 2.55 1.9 1.25 0.5 1.35 3.9 3.85 3.3

-1

0

1

2

3

4

5

1 4 7 10 13 16 19 22 25 28

Production

Consumption

Imports

Change in Stocks

Ending Stock

Rice Stock Inventory, Rice Stock Inventory, PhilippinesPhilippines1992-1995, monthly1992-1995, monthly

-600

-300

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

Beginning Stock Inventory Change in Stocks Supply Production

Imports Demand Local Demand Consumption

Others Exports Ending Stock Inventory

Decision points Decision points affected by SCFsaffected by SCFs How much rice to procure How much rice to procure

domesticallydomestically How much rice to importHow much rice to import When to import riceWhen to import rice Where to distribute NFA stocksWhere to distribute NFA stocks

Thank youThank you