SMC ready to enter rice trading in response to food security SOS

Conglomerate San Miguel Corp. (SMC) plans to enter the rice trading business and expand its chain of grain storage facilities nationwide, citing the need to contribute to the country’s food security while stabilizing the prices of the main staple.

This, as soon as Congress enacts the rice tariffication bill into law, which would pave the way for the liberalization of rice importation subject to a 35-percent tariff. Once the quantitative restriction is replaced by predictable tariffs, the private sector can respond more effectively to market signals while the government can focus on regulating to ensure food safety and fair market competition.

“If there’s a law allowing us to get into that business, then we’ll get into that and quickly we can do it,” SMC president Ramon S. Ang said in a press briefing on Wednesday after the stockholders meeting of San Miguel Food and Beverage.

Apart from participating in rice trading, Ang said the SMC group could build extra silos or grain storage facilities in its existing grain terminals as well as build new terminals in new locations.

“So when they pass a law liberalizing the importation of palay, we can store it in our temperature-controlled silo and age some of the stocks to enhance quality and it will be good for food security.  At the same time, the price of rice will go down,” Ang said.

A shortfall in rice supply is seen as a big factor behind the unexpected surge in the country’s inflation this year.  In August, the country’s inflation rate hit a nine-year high of 6.4 percent versus the local central bank’s target range of 2-4 percent.

Ang said if Philippine buyers wanted to increase the rice buffer, it’s easy to procure long-term supply from rice-producing countries like Cambodia, Vietnam and Thailand.

The 35-percent tariff that the government will impose on rice imports can in turn be used by the government to support local farmers, providing them with tractors, planting materials or buying their harvests at a good price, And said.  This should give more farmers incentive to produce more rice, he added.

Ang said SMC could get into the rice trading business quickly because its existing piers could handle sufficient cargo payload. At the same time, he noted SMC was currently building additional grain storage facilities.  About 10 locations could be devoted to rice silos, he said.

Ang said SMC was already building silos in Mariveles, Bataan, and in Pangasinan.  The group can replicate these in its Davao feedmill and put up new ones in Negros Oriental, Cebu, Pangasinan, Quezon and Batangas.  The excess capacity can also be leased out to the government, he added.

What’s important is to satisfy both the consumer and the rice farming industry, according to Ang.

“If we have facilities to buy palay from local farmers, that will also help improve the price,” he said.

Each of SMC’s grain terminal usually handles three to four million metric tons of grains and wheat per year. If SMC could build rice silos in 10 locations, Ang said this would be more than enough.

“The intention is to help food security in the country, help rice farmers and help supply consumers with reliable and good quality rice at a low price,” he added.