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When it comes to
rice - the staple food in
Asia -
governments don't like to risk failing to fill their peoples'
stomachs. Faced with rising rice prices on the international market
and unprecedented price volatility, Asia's rice exporters, with the
sole exception of Thailand, have responded by imposing export bans
while importers are seeking ways to increase stocks and reduce
consumption.
The panic arguably started this January in India, where the
government stopped issuing export licenses for all rice grades bar
Basmati, India's premium rice. India faces no rice shortage this
year but its stockpiles of wheat are down, due to a global decline
in the wheat trade last year prompted by a poor crop in Australia,
which has suffered two years of severe drought.
Worried about its wheat supplies, India decided to boost its rice
stockpile to about 10 million tons and stop exports, a wise move in
a country of 1.1 billion people but bad news for the rice price
stability elsewhere.
"By stabilising your domestic market you are basically exporting
instability abroad," noted Sumitr Broca, policy officer at the Food
and Agriculture Organisation (FAO)regional headquarters in Bangkok.
Since January, rice prices on the international market have jumped
almost 50 per cent, rising on almost a daily basis and causing
unprecedented volatility in the market even though world stockpiles
on the politically sensitive grain remain at the same level as last
year. "We could be seeing some kind of a panic reaction here,"
opined Broca.
This week,
Cambodia
and Vietnam have followed India's lead to increase stockpiles.
China, faced with food inflation at home and adverse weather
conditions, has already announced rice export restrictions. On
Wednesday, Cambodian Prime Minister Hun Sen banned all private
exports of rice to neighbouring Thailand and Vietnam for a two-month
period, a move that may have been linked to scheduled elections in
July.
Vietnam's Prime Minister Nguyen Tan Dung on Thursday ordered
authorities not to sign any more rice export contracts this year. A
February cold snap in the north of the country, which lasted an
unprecedented 45 days, destroyed over 100,000 hectares of rice
paddy.
Vietnam has signed contracts to export some 4 million tons of
rice in 2008, a figure comparable to last year. Exports in the first
quarter of 2008 were up 5.3 per cent year-on-year.
Vietnam comes second to
Thailand in the
world export market. Indonesia, the world's fourth most populous
nation with 225 million people, is also mulling a ban on rice
exports in an attempt to secure domestic supply even though the
country is heading for a bumper crop.
Indonesia's
farmers this year should produce up to 61.09 million metric tons of
unhusked rice, 5 per cent more than last year's output due to
favourable weather and increasing use of hybrid seeds.
But the increased output has led to a decline in domestic prices,
which are now almost on a par with the international prices and
prompting fears that merchants will turn to the export market.
Indonesia has
traditionally been a rice importer nation. The region-wide clamp
down on exports has put Thailand, the world's largest rice exporter
since the mid-1960s, in a delicate position. Last year, Thailand's
rice exports hit a historic high of 9.55 million tons, earning the
country 3.6 billion dollars. This year's rice exports are estimated
to reach 8.75 million tons, earning as much as 4.7 billion dollars.
"Many people who have been in this business for 30 to 40 years have
never seen this kind of market situation in their lives," said
Wanlop Pichpongsa, deputy managing director of Capital Rice Company,
one of Thailand's leading rice exporters.
"In the morning rice is at one price, and in the afternoon it's
another," said Wanlop. "It's like the stock market." Many exporters
who have sold forward without stockpiles are facing huge losses. But
the high paddy prices are generally good news for Thai rice farmers,
if they aren't bankrupted by soaring fuel and fertiliser prices,
pests and thefts. Although rice prices are high this year, they have
yet to hit record high.
Nearly all commodity prices, including rice, peaked in the mid-1970s
during the world's first oil crisis and rose again during the second
oil scare in the early 1980s.
Rice prices have been rising steadily on the world market since
2003, in tandem with oil prices, and started to shoot up last year
as oil surpassed 100 dollars per barrel. "I think there is a lot of
speculation and a lot of hoarding, because with the dollar going
down you don't want to hold on to currency, you want to park this
currency somewhere and where it is parked now is in commodities,"
said Shamika Sirimanne, a development policy expert at UNESCAP.
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