Outline

1. The Role of SCF in Rice Procurement and Storage Policy: the Philippine caseCelia M. Reyes and Christian MinaPresented during the Orientation Forum on Climate Concepts and Seasonal Climate Forecasts for Decisionmakers in Agriculture, December 1, 2005, Malaybalay, Bukidnon.

2. Outline • Objectives of the Study • Rice policy of the government • Production of Rice • Procurement of Rice • Storage and Distribution of Rice • Decision points

3. Objectives of the study • Explore the link between SCF and grain storage policy and evaluate its impact in terms of efficient grain storage and pricing decisions at the national and local levels. • Analyze the impact of ENSO on the price and regional supply of rice purchased by the Philippines, given that ENSO has an impact across Asia.

4. Importance of rice • Staple food of about 80% of Filipinos • Major item in the consumption basket of consumers (13% weight in the consumer price index) • Major source of income for millions of Filipino farmers

5. Involvement of Government • Supply and distribution aspects of rice to ensure consumers of a sufficient and stable supply of rice at low prices and to maintain reasonable returns to rice farmers through adequate price incentives

6. National Food Authority (NFA) • Sets the support price for palay (P10.50 per kilo of palay or P16.15 per kilo of rice) • Sells rice to consumers at P16.50 per kilo of rice • Seeks to minimize seasonal price variations in the various regions by positioning stocks throughout the country • Monopolizes the importation and exportation of rice to influence domestic price levels

7. Rice production • About 3 million hectares of land is devoted to rice production • Two croppings • Main harvest comes in September, October, November (about 50%) • Secondary harvest comes in March, April, May (about 30%)

8. Rice Production in 2004 • Total paddy production 14.5 million metric tons • Area harvested • Irrigated: 2.79 million hectares • Rainfed: 1.33 million hectares • Average yield (metric tons per harvested area in hectare) • Irrigated: 3.92 • Rainfed: 2.66 • All: 3.51

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

10. Volume of Rice Production (in ‘000 MT) Philippines, 1980 - 2004 Sources: Volume of palay production - BAS ENSO years – PAGASA Note: palay converted to rice ENSO Intensities: Weak La Niña Weak El Niño Moderate La NiñaModerate El Niño Strong La NiñaStrong El Niño

11. ENSO Intensities • Weak El Niño – SST anomaly (or deviation to threshold/normal level) is between 0.5 to 1.0 degree Celsius • Moderate El Niño–SST anomaly (or deviation to threshold/normal level) is between 1.0 to 1.5 degrees Celsius • Strong El Niño–SST anomaly (or deviation to threshold/normal level) is above 1.5 degrees Celsius • Weak La Niña– SST anomaly (or deviation to threshold/normal level) is between -0.5 to -1.0 degree Celsius • Moderate La Niña– SST anomaly (or deviation to threshold/normal level) is between -1.0 to -1.5 degrees Celsius • Strong La Niña–SST anomaly (or deviation to threshold/normal level) is below -1.5 degrees Celsius Source: PAGASA, 2005

12. Impact of 1997-1998 El Nino on rice production (percent change) 1997 1998 irrigated 2.9 -21.2 rainfed -8.4 -32.9 all -0.1 -24.1

13. IMPACTS OF ENSO ON PHILIPPINE ANNUAL RAINFALL Legend: Severe drought impacts Drought impacts with major losses Moderate drought impacts Near normal to above normal condition Way above normal condition Potential for flood damage Severe flood damage Source:PAGASA REDcolored years areEL NINOyears, BLUE colored years are LA NINA years and BLACK colored years are NON_ENSO years

14. NFA Procurement of RiceDomestic Procurement • Procurement operations usually occur twice a year: • Bulk of procurement occurs during the main harvest season (October to December). • Procurement also happens during the Palagad season (March to May), but only minimal since production is generally lower and prices are relatively higher.

15. Volume of Domestically Procured Rice vs. Volume of Rice Production (in ‘000 MT) Philippines, 1980 - 2003 Sources: Volume of rice production - BAS Volume of rice procurement - NFA ENSO years – PAGASA Note: palay converted to rice ENSO Intensities: Weak La Niña Weak El Niño Moderate La NiñaModerate El Niño Strong La NiñaStrong El Niño

16. Procurement of RiceImportation • Importation is actually resorted to only during a production shortfall. • The Inter-Agency Committee on Rice and Corn (IACRC) meets quarterly to assess the supply/demand situation for rice and corn and [based on this] recommends importation (volume and timing), if necessary, to the DA Secretary and NFA Council.

17. Procurement of RiceImportation • In assessing the supply/demand situation for rice and corn, the following inputs are needed: • Results of the Rice and Corn Production Survey (RCPS) conducted by the BAS every quarter, which include: (1) final production estimates for the last quarter; (2) production forecasts for the next quarter based on standing crops; and (3) production forecasts for the quarter after the next quarter based on planting intentions • Assessment of the NFA accomplishments, which include: stock inventories, procurement volume (both domestic and international)

18. Procurement of RiceImportation • Forecast of PAGASA • Other relevant information provided by the different IACRC member-institutions such as NIA, Farmers’ Groups and DA Programs • As early as January, there must be a final decision whether to import or not because it takes time to conduct negotiation for rice.

19. Procurement of RiceImportation • If importation is finally decided, actual importation happens as early as February. • The shipment then has to start by March so as to avoid rainy season. Bulk of arrival of imports usually occurs during March to April.

20. Volume of Rice Imports (in ‘000 MT) Philippines, 1980 - 2005 Sources: Volume of rice imports - NFA ENSO years - PAGASA

21. Storage of Rice • The food security mandate of the NFA is realized by maintaining an average of at least 15-day level stock at any given time in all warehouses nationwide. • Given that the national average of stock requirement is good for 15 days, the location-specific stocks vary by province according to their classification:

22. Storage of Rice • Surplus (from the level of production, can still supply to private traders outside the province): 2 days • Self-sufficient (production is just enough for consumption): 5 days • Less critical (still has production but is less than the food requirement) : 15 days • Very critical (has no production and totally dependent on the inflow delivered by the NFA): 30 days

23. Distribution of Rice • The NFA has a total of 321 warehouses distributed nationwide. • NFA already has a distribution plan even before the imports arrive so that upon actual arrival, it already knows where and how much to distribute. • In distribution, the NFA prioritizes those provinces classified under the ‘critical’ areas. The surplus provinces may be allowed to run out of stocks but not the ‘critical’ ones.

24. OCT NOV DEC JAN FEB MAR Timeline of Activities Related to Rice BAS Survey (4th round) BAS Survey (1st round) Minimal procurement (Palagad season) Actual importation National Planning Conference Decision to import Import arrivals (target period) Main procurement period Storage period / positioning of the stocks

25. APR MAY JUN JUL AUG SEP Timeline of Activities Related to Rice BAS Survey (2nd round) BAS Survey (3rd round) Minimal procurement (Palagad season) Midyear Planning Conference Import arrivals (target period) Distribution period Storage period / positioning of the stocks

26. Rice Stock InventoryPhilippines, 1990-1999

27. Monthly Rice stock inventory

28. Rice Stock Inventory, Philippines1992-1995, monthly

29. Decision points affected by SCFs • How much rice to procure domestically • How much rice to import • When to import rice • Where to distribute NFA stocks

30. Thank you