Philippine rice inventory dropped to a low of 13 days of consumption as of mid of last month, less than half of the ideal 30 days the government wants.

On average, the National Food Authority keeps inventory of 15 days worth of consumption.

The buffer is needed since sometimes import shipments are delayed or storms wreck havoc on local deliveries.

In a related development, Vietnam, according to Agriculture secretary Arthur Yap as quoted by Reuters, has agreed in principle to guarantee rice shipments to the country.

Last week, President Arroyo, in an unprecedented move requested that Vietnam guarantee it will ship rice to the Philippines.

The country which faces tight supply in rice amid rising global prices, but the exact volume was yet to be determined by Vietnam and the Philippines.

"We still need to fine-tune the agreement," Yap said.

The Philippines, the world’s biggest importer of rice, has set a tender for 550,000 tons on March 11 after two previous tenders failed to fill the required volumes.

The price of the Vietnamese rice shipment would be decided by public bidding despite the government-to-government negotiations, Yap has said earlier.

Manila had planned on importing 1.6 million tons of rice this year, down from last year’s near 1.9 million ton purchase, but an ongoing review of the country’s rice stocks due to be finished within the month may result in higher imports.

Last month, a government source said rice imports for 2008 could hit 2.4 million tons.

Global rice prices have risen as big rice exporters clamped down on shipments to satisfy local demand.

The Philippine government has been increasing its production to meet a long-term goal of self-sufficiency in rice but output growth, estimated at best this year at between 6-7 percent, is not enough to feed one of the fastest-growing populations in the world.

Nations had been increasingly anxious on how they will feed their people.

Faced with soaring grain prices and growing fears over the security of food supplies, India and to a limited extent Vietnam has restricted some rice exports. Indonesia has raised taxes on palm oil shipments and Malaysia is building up stocks.

Arroyo’s appeal was seen to be an overtly political route to allay fears that the Philippines could run short of its staple national food.

Robert Zeigler, director general of the Philippines-based International Rice Research Institute (IRRI) said there is a crisis brewing in terms of rice supply.

Nearly half the planet’s 6.6 billion people depend on rice to survive but rising populations and economic growth mean that the world is already eating more of the grain than is harvested. Vietnam, the world’s second-biggest exporter, has put a temporary ban on shipments to meet domestic demand between harvests.

World stocks of the grain are currently around 72 million tons, their lowest levels since the early- to mid-1970s when food shortages triggered a devastating famine in Bangladesh.

Zeigler said other importing nations in sub-Saharan Africa and Asia could also be at risk and as soon as this year.

"When you have a president calling a prime minister asking them to guarantee rice supplies it’s a possibility, that’s for sure," said Zeigler.

Bangladesh is currently scrambling to secure supplies of rice after a devastating cyclone last year washed away about 1 million tons of the grain.

China, a net exporter of corn, rice and wheat in 2007, has removed import taxes, raised export taxes and imposed export quotas on grains and flour due to red-hot inflation.

Average rice prices have nearly doubled to around $393 per ton in the past five years but yields are plateauing as rapid urbanization shrinks available farmland and diverts water and labor away from production. Meanwhile soaring grains prices are also driving up competition for arable land.

Surging demand from the fast-growing Middle East and growing African consumption have boosted the price of rice from Thailand, the world’s biggest exporter, by over 20 percent to their highest in a decade — yet another inflationary headache for policymakers.

"There is no easy relief in sight," said Ted James, principal economist at the Asian Development Bank. "I don’t think we will see them (prices) falling precipitously any time soon."

"But I don’t think there will be a shortage if the price is allowed to reflect the market. If you try to keep prices below the market then shortages could emerge because of hoarding and speculation." (Reuters)