According to GPH data, Philippine paddy rice production increased roughly three percent from 18.4 million tons in CY2013 to a record 19 million tons in CY2014. On a MY basis, rice output are forecast to continue to modestly increase through MY15/16, enhanced by continued GPH agricultural sector investment and utilization of higher quality seed varieties. The Philippine Department of Agriculture recently pushed back its ambitious goal of reaching national rice self-sufficiency to CY2016 from the original timeline of CY2013.

Under the Association of South East Asian Nations (ASEAN) Trade in Goods Agreement (ATIGA), rice imports have a 35 percent duty through CY2015. In July 2014 the World Trade Organization's (WTO)granted the Philippines request to extend quantitative restrictions on rice imports through July 2017. In exchange, the in-quota limit was raised to 805,200 MT (from 350,000 MT) and the in-quota tariff was reduced from 40 percent to 35 percent (the out-of-quota tariff remained at 50 percent), through July 1, 2017. The increased quota is in effect but the tariff rate change has yet to be implemented pending the issuance of the appropriate Executive Order.

MY15/16 imports are forecast to decline from the previous year due to continued improvement in local production and the expected significant carryover stocks from MY14/15.

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Philippines

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

4,800

4,800

4,890

4,740

0

4,825

Beginning Stocks

1,487

1,487

1,695

1,695

0

2,152

Milled Production

11,858

11,858

12,200

12,057

0

12,400

Rough Production

18,822

18,822

19,365

19,138

0

19,683

Milling Rate (.9999)

6,300

6,300

6,300

6,300

0

6,300

MY Imports

1,200

1,200

1,600

1,600

0

1,305

TY Imports

1,700

1,700

1,700

1,700

0

1,400

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

14,545

14,545

15,495

15,352

0

15,857

MY Exports

0

0

0

0

0

0

TY Exports

0

0

0

0

0

0

Consumption and Residual

12,850

12,850

13,200

13,200

0

13,250

Ending Stocks

1,695

1,695

2,295

2,152

0

2,607

Total Distribution

14,545

14,545

15,495

15,352

0

15,857

1000 HA, 1000 MT, MT/HA

Production:

According to the Philippine Statistical Authority (PSA), the value of local farm output in CY2014 expanded just 1.8 percent, well below the Philippine Department of Agriculture (DA) target of 3-5 percent. Crop production accounted for 52 percent of overall farm output, and grew modestly (3.3 percent) from the previous year's level. Rice had the largest share (20 percent) of total farm output, followed by hog production (13 percent), chicken broilers (11 percent), and corn (7 percent).

According to press reports, the DA expects that a return to more normal weather patterns combined with increased infrastructure investments will result in farm output growing 3–5 percent in CY2015. Some local industry analysts, on the other hand, expect overall CY2015 farm output growth at a much slower 1.5-2.5 percent.

According to the PSA, paddy rice (palay) production in CY2014 reached a record 19 million tons, up 2.87 percent from the CY2013 level (18.4 million tons) despite a marginally lower area harvested. Area harvested declined to 2.64 million hectares in CY2014 from 2.70 million hectares in CY2013. Yields, however, improved to 4.01 tons per hectare from 3.86 tons per hectare during the same period, according to PSA data. Major rice producing areas include the Cagayan Valley, Central Luzon, the MIMAROPA region (composed of Mindoro, Marinduque, Romblon and Palawan provinces), the Bicol Region, and the Davao region.

For the January-June 2015 period, the PSA projects paddy rice output at 8.55 million tons, up two percent from 8.38 million tons for the same time period the previous year. The PSA attributes the increase to favorable weather conditions, wider area harvested, and better yields compared to the previous year's levels. Based on PSA data from the second half of CY2014 (which showed slightly less than expected performance) and the CY2015 first half forecast, Philippine rice production and area harvested in MY14/15 were pared down slightly.

High production costs, coupled with postharvest and market inefficiencies result in high prices and make Philippine rice uncompetitive compared to its regional neighbors. Preliminary data from the PSA shows that the average farm gate price of paddy rice in CY2014 was P20.08 ($0.45) per kilo, 19 percent higher than the P16.93 ($0.38) per kilo average price in CY2013.

Rice production is likely to continue increasing through MY15/16 as the Philippine government vigorously pursues self-sufficiency before the end of the current Aquino government in CY2016.

Consumption:

The Philippine economy grew by 6.1 percent in CY2014. Although Philippine Gross Domestic Product (GDP) expanded less than the government's target of 6.5- 7.5 percent, it is still one of the most robust economies in the region. Services accounted for over half of the economy (57 percent) in CY2014, while industry accounted for 33 percent of GDP. Agriculture accounted for a 10 percent share. Inflation in CY2014 averaged 4.1 percent and marked the sixth consecutive year inflation remained within the official target range, according to the Philippine Central Bank (PCB). The PCB has an inflation target of 2-4 percent for the period CY2015-2016.

Economic planners expect GDP growth to accelerate in CY2015 citing an expected increase in government spending and private consumption. CY2016 is an election year and campaign-related spending is expected to result in a consumption spike in the second half of CY2015.

Rice is the main staple of the Philippine population, currently estimated at over 100 million and expanding by 2 percent annually. Food security is often equated with the availability of adequate and affordable rice.

Commercial rice retail prices increased in CY2014. According to rice milling contacts, as a general rule, retail prices are twice the price of paddy.

The average retail price of commercial regular milled rice in CY2014 was P38.96 ($0.87) per kilo, 16 percent higher than the P33.7 ($0.75) per kilo average price in CY2013. According to industry contacts, the higher CY2014 prices are likely the result of the decline in smuggled rice imports, which some analysts believe have become an integral component of the nation's rice supply.

Retail prices started to ebb in the last quarter of CY2014, coinciding with the main rice harvest season, as well as the arrival of considerable official rice imports. Rice consumption through MY15/16 is expected to grow modestly as the population increases.

Trade:

The WTO in July 2014 granted the Philippine request to extend quantitative restrictions on rice imports through July 2017. In exchange, the rice tariff quota or Minimum Access Volume (MAV) will be raised to 805,200 MT (from 350,000 MT) and in-quota tariffs will be reduced from 40 percent to 35 percent. Out-of-quota tariffs are to remain at 50 percent through July 1, 2017. The increased quota is now effective but the tariff changes have yet to be implemented pending the issuance of the appropriate Executive Order. The following is a breakdown of the new MAV.

Old

New

MAV

350,000

805,200

Omnibus

187,000

50,000

Country Specific Quota:

163,000

755,000

1. Thailand

98,000

293,000

2. China

25,000

50,000

3. India

25,000

50,000

4. Australia

15,000

15,000

5. Vietnam

-

293,000

6. Pakistan

-

50,000

7. El Salvador

-

4,000

Source: National Food Authority

Under the ATIGA, rice imports from ASEAN-member countries are levied a 35 percent duty. There are no quotas.

Rice imports (through October 2014) are provided in the following table. Philippine import statistics are used as reports from Vietnam rice exporters are not provided in the GTA. Rice imports from January to October 2014 (most recent available) reached 870,246 tons, according to GTA data.

Philippines Import Statistics

Commodity: Rice, Group 58 (2012)

Annual Series: 2011 - 2013

Quantity

Partner Country

Unit

2011

2012

2013

2014*

World

T

709798

1022800

404699

870246

Vietnam

T

581880

822940

216686

765867

Thailand

T

118385

20563

165008

100048

India

T

2147

102154

13645

3091

China

T

1527

1891

4897

1206

Singapore

T

1514

1173

4263

31

Taiwan

T

0

1062

200

2

Others

T

4345

73017

0

1

*January to October, most recent data available

Source: Global Trade Atlas

For the same period of available data for CY2014 (January to October 2014), the GPH indicates imports were at roughly 1.4 million tons, and estimates imports for the entire CY2014 at 1.8 million tons.

Post forecasts overall imports in MY15/16 will modestly decline from the previous year's level mainly due to increasing production. MY15/16 imports are predicted to comprise of 805,000 tons of legitimate imports (representing the revised MAV) and 500,000 tons of undocumented imports.

Stocks:

Philippine rice inventory is comprised of those stocks held by the GPH, the commercial sector, and households. As a matter of GPH policy, a 90-day national rice buffer stock entering the third quarter of each year should be maintained. Of this desired stock level, a 30 day supply of rice stocks should be in the GPH's possession. Additionally, at any given time, the GPH should have a stock level good for 15 days.

The Philippines has also committed to maintain 12,000 tons of rice at any given time for other ASEAN-member country in times of emergencies under the ASEAN plus Three Emergency Rice Reserve ASEAN Food Security Reserve.

Ending rice stocks in MY14/15 were pared down due to the downward revision made to production, but are expected to modestly increase through MY15/16. Stocks are estimated to be sufficient for 61 days (at a daily requirement of 35,000 tons) in MY14/15 and 74 days in MY15/16.

Policy:

After failing to reach rice self-sufficiency status in CY2013, the Food Staples Self Sufficiency Program 2011-2016 was revised, and the self-sufficiency target was pushed back to 2016. Under the revised Food Staples Self Sufficiency Program 2014-2016, the GPH hopes to produce an estimated 20.08 million tons of paddy in CY2015, and 20.52 million in CY2016.

In May 2014, President Aquino appointed former Senator Francisco Pangilinan as Presidential Assistant for Food Security and Agricultural Modernization (PAFSAM), a newly created Cabinet-level position. Shortly after, the following agencies were moved from the DA to the office of the PAFSAM:

1. National Food Authority (NFA)

2. National Irrigation Authority (NIA)

3. Philippine Coconut Authority (PCA)

4. Fertilizer and Pesticide Authority (FPA)