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Manila scraps rice purchases

The Philippines scrapped its largest rice tender of the year on Monday and said it preferred to hold back importing until prices fall, sending a signal to world grain markets that rice prices might have peaked.

Posted: Monday, May 5, 2008, 10:14 (BST)
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After decades spent transforming paddy fields and farmlands into hi-tech industrial parks and 21st century cities, the issue of agricultural self-sufficiency has come back to haunt Asia -- home to two-thirds of the world's poor.

At the ADB meeting in Madrid, finance ministers warned of dire consequences, including riots, if the food price spiral continued and the Manila-based bank pledged financial aid to help plug the problem.

Southeast Asian nations have also agreed to cooperate over the rice market, but no measures have been unveiled.

The Association of South East Asian Nations (ASEAN) already has an emergency rice reserve of around 87,000 tonnes which Jarina said Manila would like to tap.

Thai Prime Minister Samak Sundaravej recently revived talk of an "OPEC-style" rice cartel in Southeast Asia involving producers Thailand, Vietnam, Myanmar, Laos and Cambodia. But analysts have said the idea was unlikely to gain traction.

Myanmar, the world's biggest rice exporter before World War Two, has yet to say how badly farms have been affected by a devastating cyclone that ripped through its rice bowl on Saturday.

Cambodia's Prime Minister said on Monday that a rice cartel would be designed to help and not hinder food security.

"We do not mean to keep the commodity in stock when the price increases, or to set the price high for export," Hun Sen told students in Phnom Penh. "Friends of ASEAN countries should not worry about the forming of such a rice cartel."

The Philippines, which has spent around $1 billion buying approximately 1.7 million tonnes of rice for this year, said it would allow private importers to buy up to 163,000 tonnes of rice in a country-quota specific tender on May 9.

The rice will be sourced from Thailand with 98,000 tonnes, China and India with 25,000 tonnes each and Australia with 15,000 tonnes, NFA officials said.

But Australia is producing one of its smallest rice crops ever this year after the worst drought in a century and Gerry Lawson, chairman of Sunrice, the country's main exporter, said Australia would not be able to take part in Friday's tender.

Private importers tend to stay on the sidelines in the Philippines because of a 50 percent tariff.

The NFA said it would replace the tariff with a service fee for Friday, but demand is still expected to be lukewarm because it's difficult to compete locally with subsidised NFA rice.



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