Philippines Seeks Wheat Supplies After China Rebuff|
By Clarissa Batino and William Bi
April 11, 2008
(Bloomberg) -- The Philippines said China turned
down a request to supply wheat, adding to concern that the world
faces a worsening shortage of staple foods that has already
driven grain prices to records.
``China politely turned us down, saying they also need to
stock up,'' Trade Secretary Peter Favila said in a telephone
interview today. ``We've alerted all our trade attaches to find
out where we can source wheat, so as not to cause shortages.''
The rebuff follows a struggle this year by the Philippines
to secure supplies of rice, of which it is the largest importer.
Wheat has more than doubled in a year to a record and rice is up
96 percent, triggering riots from Egypt to the Ivory Coast.
China ``is tightly controlling exports'' through permits and
taxes to secure grain supplies, Xu Fan, an analyst at China
International Futures Co., said by phone from Shenzhen.
Global food prices gained 57 percent last month from a year
earlier, according to the United Nations' Food and Agriculture
Organization, or FAO. There were ``very limited supplies'' of
rice available given export restrictions, the FAO said April 2.
Grain-producing countries ``are definitely putting self
interest ahead of exports because so much of disposable incomes
gets spent on food,'' said Luke Chandler, senior analyst at
Rabobank Group, based in Sydney.
The Philippine Star earlier reported that the government
asked China to provide 200,000 metric tons of milling wheat,
equivalent to about 10 percent of annual consumption. Favila said
that his request to Beijing didn't specify any volume.
China has as much as 200 million tons of grain reserves,
Premier Wen Jiabao said April 6. Still, China International's Zhu
said that while 200,000 tons may be small relative to the
stockpiles, China was unlikely to issue any export permits soon.
``We've asked Australia. I've also contacted the U.S.
because the ambassador has assured us they will help with the
supply,'' said Favila, adding that the Philippines was looking at
coconut and vegetable flour as potential substitutes for wheat.
``Prices of bread will go up. Either that or the size would
Rising food prices and the difficulties in gaining imports
pose political and economic challenges for Philippine President
Gloria Arroyo, who said this week she was ``leading the charge''
``Domestic food inflation and food security are obviously
very politically sensitive issues,'' said Chandler, the senior
analyst at Rabobank. ``We're likely to see governments come in
and place bans on exports.''
China started to tax wheat exports at a rate of 20 percent
this year, according to a Dec. 30 statement from the Finance
Ministry. The tax for corn and rice was set at 5 percent.
The U.S. ambassador to the Philippines pledged this week to
ensure that the Asian country, a former colony, would be supplied
with as much rice as the nation of 91 million needs. The country
was ``assured absolutely'' of supply, Kristie Kenney said April
Rice, the staple food for half the world, has almost doubled
in price in the past year as China, Vietnam and India cut sales
abroad and the Philippines tried to secure shipments. The price
traded at a record $21.60 per 100 pounds on the Chicago Board of
Trade on April 8.
Wheat futures in Chicago reached a record $13.495 a bushel
on Feb. 27 on forecasts global demand will exceed output for the
seventh time in eight years. The contract traded at $9.4725
``In the early part of the year, people weren't talking
about shortage,'' said Joric Nazario, treasurer at Philippine
Veterans Bank in Manila. ``Now everybody's talking about it.''
India scrapped export incentives for rice, steel and cement
to bolster local supplies and tame inflation, Trade Minister
Kamal Nath said in New Delhi today.
Philippine inflation accelerated at 6.4 percent in March,
the fastest pace in 20 months as food and fuel costs gained.
Crude oil traded at a record $112.21 a barrel on April 9.
``Food inflation could surmount oil prices as the major
threat,'' Vishnu Varathan, a regional economist at Forecast
Singapore Pte., said in an interview. ``It could spill over to
the early part of next year. This would be the making of a storm
you wouldn't want to be in, especially with the global
The food-import situation ``would affect inflation,'' Favila
said. ``But what good are the numbers if the people are hungry?''
Original article: Bloomberg
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