Business

Thursday September 20, 2012

Challenging times for Bernas

By HANIM ADNAN
nem@thestar.com.my


Uncertainty in global weather pattern affecting food crops

PETALING JAYA: The 10-year extension given to Padiberas Nasional Bhd (Bernas) to manage the country's rice stockpile till Jan 10, 2021 came as no big surprise but industry observer and analysts are expecting challenging times for the rice custodian to supplement the country's 30% rice deficit via imports.

Since 1996, Bernas has been the sole rice importer, purchaser of padi from local farmers and the distributor to rice retailers in Malaysia.

An industry observer said any potential disruptions, particularly in supply shortages or erratic upswing in global rice prices, will put Bernas on high alert to ensure the national rice stockpile stays intact.

“The uncertainty in global weather pattern wreaking havoc on food crops may lead to dwindling supplies and rising food inflation,” he said.

Rice production is affected by global warming and climate change. – AFP Rice production is affected by global warming and climate change. – AFP

He expects Bernas' ability to stockpile rice would be put to the test if such a situation were to arise.

For example, the move by the world's largest rice producer Thailand in September last year to buy padi from its farmers at a higher guaranteed price had struck fear among major importing nations including Malaysia.

Many feared that they might need to revisit the severe rice supply shortage in 2008, which triggered the grain price at one point to surge by 200%.

The Thai government's purchasing price was even higher than Malaysia's average rice price at RM980 to RM1,150 per tonne.

During the food crisis in 2008, the industry observer said, rice exporting countries were not able to fulfil Asian nations' rice requirement as “they also have to ensure enough supply for their own use.”

Similar to other commodities, rice production is also signficantly affected by global warming and climate change.

This phenomena will also give rise to the emergence of new rice pests and diseases besides resource scarcity which will seriously affect sustainable rice production.

Coping with increasing demand in rice was not an option at this challenging time given the constraints in soil and water availability, he added.

Meanwhile, an analyst with a local brokerage said Malaysia last year managed to achieve a 72% self-suffciency level in rice with the current average rice yield of 3.7 tonnes per ha per season.

“In this situation, almost 30% of the local demand will still have to depend on rice imports,” he added.

However, since the 2008 rice shortage incident, Bernas had been procuring rice via active buying both on the spot and forward contracts, said the analyst.

Bernas has also been multi-sourcing and undertaking long-term purchasing strategy to cushion from the impact of sudden increases in international prices or weather-related disruptions.

In 2011, Bernas rice import volume increased by 14.2% to 1.06 million tonnes compared with 935,244 tonnes in 2010. The bulk of the imports were from Vietnam (49%), Thailand (33%) and Pakistan (16%).

Bernas managing director Datuk Bakry Hamzah had recently said he did not foresee major disasters in rice-producing countries.

He said the price of rice was expected to be stable until year-end with ample supply. The current prices are relatively stable at RM22 to RM23 per 10 kg range while the government-subsidised rice costs RM18 per 10 kg.

“The rice we purchased is kept in the stockpile for five to six months. In the first half, more expensive rice was purchased. The sale of rice today (in September) comes from the stock we purchased in March or April, which was cheaper,” Bakry added.

Bernas' net profit for the second quarter ended June 30 fell 60.4% to RM25.12mil from RM63.5mil a year ago, due to higher cost of imported rice and operating cost. Its revenue, however, rose 12.63% to RM937.6mil from RM832.4mil previously.

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