February 11, 2009

The National Food Authority--the Philippine government's grain arm--will purchase an estimated 250,000 tonnes of corn in the first half of 2009 to cover a production shortage of 340,000 tonnes due to damage from heavy rains.

 

An official of the Department of Agriculture, who refused to be named, said the volume is "all we have right now" and "still have to assess how much is the shortfall during the second semester."

 

The private sector earlier feared that the shortfall could reach as much as 600,000 tonnes for the full year.

 

Heavy rains in corn-producing regions in northern and central Mindanao destroyed crops and prevented farmers from planting, prompting some of them to shift to rice.

 

The Agricultural Statistics Bureau forecast that Philippine corn production in the first semester would decline by 2.6 percent to 3.206 million tonnes from 3.293 million tonnes on-year.

 

The government is keeping corn imports to a minimum to prevent a sharp drop in local prices. The government has also imposed high tariffs on cheaper imported corn to protect local farmers.

 

The department last week approved the request of corn producers to directly import, giving members of the Philippine Maize Federation an allocation of as much as 50,000 tonnes.

 

Corn end-users, such as broilers and poultry and hog raisers have already received a combined allocation of 200,000 tonnes.

 

A feed mill official said the government would impose a fixed service of P4 per kilogram of imported corn instead of a 35 percent tariff as agreed earlier with the government.

 

He said feed millers submitted a position paper on February 4 asking the Agriculture Department to consider their request to maintain the 35 percent tariff, instead of the fixed service fee of P4 a kilo.

 

The official said based on calculations, the fixed service charge would be higher if world corn prices soften. At US$210 per tonne, the calculated charge would be P3.50 per kilogram only, hence, a flexible service charge is favourable, the official said.

 

Landed cost of imported corn is estimated to cost P19 to P20 per kilogram while local corn sells between P17.50 and P15.50 a kilo.

 

NFA will import the corn outside the minimum access volume allocation, which means the imports will carry a 50 percent tariff.

 

However, the NFA agreed to subsidize the 15 percent tariff under its Tax Expenditure Fund, a mechanism allowed on special importation cases, leaving a 35 percent tariff to be paid to the Finance Department.