Manila, April 16 - The Philippine National Food Authority's plan to buy up to 500,000 metric tons of rice in a tender May 5 could further boost already record prices of the grain in the global market, traders said Wednesday.
The NFA announced the plan to buy 25% broken variety for shipment between May and June this year earlier in the day, just a day before another 500,000-ton tender that traders have been looking to for price direction.
Possible sources for the May tender include Thailand, Vietnam, China, Pakistan, India, Australia and the U.S. The NFA has allocated PHP17.68 billion to buy the rice, the NFA said.
The May 5 tender, however, will be exclusive to government suppliers, meaning that private exporters and traders won't be allowed to make offers. President Gloria Macapagal Arroyo said Tuesday the NFA would hold the tender May 2.
Traders, however, expect the tender to spark even higher prices, especially given the timing of the announcement. On Thursday, the NFA will hold a tender to buy 500,000 tons of mostly 25% broken variety for delivery between April and June.
But Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said it's unlikely that state suppliers from Thailand will be able to supply any part of the Philippines' requirement.
"I don't think the Thai government will have enough supply for the Philippines...The government holds 2.1 million tons right now, and it's unlikely they will release anything," Chookiat said.
If the Philippines wants to make the auction exclusive to government suppliers, Vietnam could be a more viable source of imports, he said.
Chookiat refused to make any price forecast but did say, "Thursday's prices will be very high."
Echoing Chookiat, another trader said the Philippines may be helping lift global prices higher given the "bullish way" it makes its purchases. "Is this sensible buying?," the trader asked.
Global prices could easily fall by $100/ton if the Philippines scrapped its April 17 tender, the trader said.
"Purchase, hoard, purchase again at higher prices and make a windfall profit on the hoarded rice. Looks like this is the name of the game," he added.
But an NFA official said the agency doesn't make any profits by importing rice as it sells the grain in the retail market at subsidized rates.
The NFA has so far contracted to buy 1.1 to 1.2 million tons of the grain in 2008. The two tenders on April 17 and May 5 for a total of 1 million tons would round out its import quota of 2.1 million tons. A net exporter of rice in the 1970s, the Philippines is now Asia's largest rice importer.