ASEAN Nations Can Help Prevent Global Rice Price Rise

MANILA, PHILIPPINES - ASEAN nations can help avoid world rice price shocks by reducing export restrictions, placing less emphasis on self-sufficiency, retooling Thailand’s rice pledging program, and expanding coordinated rice policies with India and Pakistan, according to a series of working papers from the Asian Development Bank (ADB).

“So far, the rice market appears to be holding steady and current production estimates suggest that overall prices will remain stable, which is good news in a time of worry over the global corn, wheat, and soybean markets,” said Lourdes Adriano, Practice Leader for Agriculture, Food Security and Rural Development in the Regional Sustainable Development Department at ADB. “To enhance resiliency and ensure that rice prices do not jump beyond the reach of the region’s poor, policy makers must think and act regionally.”

The 2007-2008 rice price spike was triggered in part by export restrictions, and panic buying by importers. The working papers, produced out of the recent ASEAN Rice Trade Forum organized by the ASEAN Food Security Reserve Board, the ASEAN Secretariat, and  ADB, show regional trade restrictions pushed global rice prices up 149%.

Instead, the papers recommend that rice importing countries lower their  self-sufficiency targets in exchange for commitments from exporting countries to stay away from unilateral export restrictions. Importing countries would feel less need to insure themselves against trade disruptions and exporting countries would gain new markets.

Assuming normal weather conditions and same macro conditions, rice output among ASEAN nations is expected to grow at 1.37% annually, from 110.5 million metric tons in 2010-2011 to 128.3 million metric tons by 2021-2022. Harvests will increase by 1.22% annually, while harvest area will increase by 0.15% to nearly 47 million hectares by 2022.

Thailand is projected to return as the world’s top rice producer, but the working paper notes that its rice pledging program, which guarantees farmers receive more than market price for their crops, provides disincentives to its exporters, resulting in the continual loss of rice export revenues since late 2011. As of 28 May 2012, exports are down by 43.1% or 2.86 million metric tons.

Enhancing ASEAN’s Resiliency to Extreme Rice Price Volatility also warns that should India revert to an export ban as it liquidates its rice stock and suffers from drought, the global rice economy could tighten quickly.

This is particularly true if Thailand maintains its high paddy pledging price floor, as it effectively serves as an implicit tax on its rice exports. The recent climb in the price of international rice, and particularly for all types of Vietnamese broken rice, is because Thai traders are buying Vietnamese rice through the Cambodia-Thai borders to meet their export orders. Purchasing rice through this route is still cheaper for Thai traders than buying high-priced Thai rice.

Cambodia, Lao People’s Democratic Republic, and Myanmar have good production potential, given the availability of land and water resources, but require investments in transportation and market infrastructure, research and development for producing more with efficient use of natural resources, and improvements in production and milling quality.

ASEAN also supplies rice to African countries. In 2011, Thailand and Viet Nam provided more than half of the total rice imports of Africa. Together with India and Pakistan, these four rice producing countries supplied about four-fifths of African rice needs.

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