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Asia nations hurting as price of rice soars

by Staff Writers
Hong Kong (AFP) March 9, 2008
The soaring price of rice has triggered a supply and demand crunch that is hurting some of Asia's neediest nations, forcing them to spend more on imports, industry experts and officials say.

For the likes of Thailand and Vietnam, the world's two biggest exporters of the grain, the rising demand is a money-spinner with rice now selling at more than 500 dollars a tonne in Bangkok and nearly as much in Hanoi.

But from Bangladesh to the Philippines, from India to Indonesia, the squeeze is bad news as they seek to balance cost with the imperatives of feeding hungry populations and averting social chaos.

"Every Asian government is well aware of the close relationship between political stability and the stability of the rice price," Jonathan Pincus, the UN Development Programme's chief economist in Vietnam, told AFP.

"So every government in the region will be doing all it can to maintain price stability, particularly for basic food grains."

At the end of February, Thailand's benchmark rice was trading at more than 500 dollars a tonne, a rise of more than 100 dollars from a month earlier and up from just 325 dollars a year ago.

Exporters in Vietnam meanwhile were setting prices at 460 dollars a tonne last month, the state news agency VNA said -- up more than 50 percent from a year ago.

"It's a global issue. All cereal prices are going up," said Andrew Speedy, the UN Food and Agriculture Organisation's Vietnam representative.

"This is quite serious. It's hurting everybody, especially the poor."

In the first two months of 2008, Vietnam's rice exports brought in 150 million dollars, an increase of 78 percent from a year ago.

Much of the output is destined for the Philippines, whose President Gloria Arroyo asked Vietnamese Prime Minister Nguyen Tan Dung last month to guarantee stable supplies.

Unable to meet its own needs, the Philippines will import up to two million tonnes of rice this year, according to the government.

Last year its harvest was 6.44 million tonnes, National Food Authority spokesman Emmanuel Salonga said, but it needs 11.8 million a year.

"Our population is growing and arable land is being converted to other uses so we cannot cope with demand," he said.

Indonesia's rice production has been outpaced by its population growth for more than a decade, said Mangara Tambunan from the country's Centre for Economics and Social Studies.

"The government has to open the door to more imports. It should not be so reticent," he said. Last year, Indonesia imported 1.5 million tonnes.

To ensure stability, a government agency buys and releases stocks and sets import duties. Heavily subsidised rice is also sold to millions of the poorest families, yet even those prices are rising.

"They're trying to get producers to sign long-term contracts," the UNDP's Pincus said, referring to Indonesia and the Philippines.

"But who's going to sign a long-term contract now for rice deliveries when prices are rising so quickly and so steadily? No one wants to be left without adequate stocks, and that contributes to driving up the price.

"They're willing to pay a higher price for future deliveries because they don't want to be caught short."

In Bangladesh, which has a population of 144 million, the price of rice has doubled in a year, vastly outpacing income levels, said Ruhul Amin, deputy head of the government's food planning unit.

"People are cutting all their other spending to focus only on food," Amin said, but with 40 percent of the population relying on a dollar a day or less, the poorest are struggling to survive.

"They have to survive on a pittance, and the rises are causing a general feeling of gloom and depression," he said.

This year Bangladesh will need to import some three million tonnes due to damage caused by floods in mid-2007 and November's devastating cyclone.

Some of that is coming from neighbouring India, but otherwise New Delhi has halted exports of non-basmati rice to keep its own domestic prices in check.

India allowed the export of 3.2 million tonnes of non-basmatic rice in the first half of the current financial year, but since October no new contracts have been signed.

The move has upset the All India Rice Exporters' Association. "Farmers react to high prices by producing more," said its president, Vijay Sethia. "Restricting trade just distorts the price signal."

For now, some nations appear insulated against rising prices. China, Japan and South Korea are largely self-sufficient and protect their rice sectors via steep import tariffs or heavy subsidies.

In Japan, the price of high-quality rice is even waning with falling demand as younger Japanese turn to bread and Western-style dishes.

As for China, its severe cold snap earlier this year is unlikely to impact production much as it was not the planting season.

The freeze may drive up prices, said Feng Lichen, a trader at the Dalian Commodity Exchange, but said the government was using tax breaks and subsidies to ease the pressure.


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