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DA denies overpricing of rice, claims that country saved money

The Department of Agriculture (DA) claimed that the Philippine government saved around P370 million from the 1.5 million metric tons (MMT) of imported rice it contracted under a government- to-government deal with Vietnam.

Agriculture Secretary Arthur C. Yap made this claim even as he denied reports that the rice bought by the Philippines from Vietnam was overpriced by 45 percent.

“That’s not true. I challenge them to show proof that the Philippine government bought overpriced rice,” said Yap in a telephone interview.

The DA chief pointed out that at the time the imported rice was contracted in December, the price was at an average of $549 per metric ton (MT). The imported rice from Vietnam’s Southern Food Corp. started arriving in the country in March.

“Other suppliers quoted $561 and $559 per MT at the time. If we had waited until February or March to contract our rice requirements, we could have paid more because prices already shot up,” said Yap.

He said that the terms were for 180 days and that the total cost of the deal was at $824.25 million.

The Philippines opted for government-to-government negotiations for its requirements as a way of preventing a repeat of what happened in 2008, when rice prices shot up by more than $1,000 per MT. The Philippines was singlehandedly responsible for moving the rice market last year.

Agriculture Undersecretary Bernie Fondevilla, meanwhile, explained that when the deal was finalized in December, the cost ranged from $456 to $459 per MT, freight on board.

“Based on the said December rates, the Philippine government obtained a good deal at that time because the actual import price agreed upon by Manila and Hanoi was $549.50, when you include the add-on costs like freight, bid and performance bonds, surveyor’s fees, and the cost of money arising from the Philippine government’s payment of the imports, not in cash, but on a deferred credit basis of six months,” said Fondevilla in a statement.

The transaction actually saved some P369 million ($7.54 million) for the government, based on the prevailing February 2009 prices of the grain, as posted by the Board of Trade of Thailand, which is the industry reference for the world market price, National Food Authority (NFA) Administrator Jessup Navarro said. Under the agreement, Vietnam will start delivering the imports in February.

“There was no $380/MT rice in December last year,” said Fondevilla.

Fondevilla and Navarro backed the assertion of agriculture secretary Yap that the said government-to-government transaction was a “good deal” because it was approved by the Private Sector Procurement Transparency Group (PSPTG) headed by lawyer Paterno Menzon, representing the Bishops-Businessmen’s Conference (BBC).

The Philippine and Vietnamese governments agreed last December on the $549.50 price based on the following breakdown: $645.15 for 5 percent brokens, $595 for 15 percent brokens and $535 for 25 percent brokens.

Fondevilla explained that during the time that the transaction was finalized, the NFA had estimated the price per metric ton of rice in the world market at $555.80, which already comprised the freight on board projected price of $491.68 at 25 percent brokens; a quality premium fee of $5 per ton; cost of money at $23.70 (computed at 0.9 percent per annum); the projected 7 percent increase in world prices in the first semester of about $32, based on the price trend during the last five years; a $35 freight cost; and other expenses such as surveyors costs, bid and performance bonds and fumigation fees computed at $0.42.

“There are add-on costs to the actual purchase price to ensure that such a huge volume of rice is delivered from the source—which is, in this case, Vietnam—to the Philippines and in consideration of the deferred-payment arrangement,” he said.

Reacting to a news item questioning the said transaction, Fondevilla and Navarro said it was incorrect for this news report to compare rice spot prices, which are quoted in cash, with bulk purchases like the one made by the NFA, without considering the volume and terms of payment for the agency-purchased stocks.

Written by Jennifer A. Ng

Source: Business Mirror