Asean can help ease rice price shocks: ADB

Thailand is projected to return as the world’s top rice exporter, but its pledging scheme, which guarantees farmers a higher-than-market price for their crops, provides disincentives to its exporters, resulting in the steady decline of rice-export revenues since late last year. As of May 28, exports were down by 43.1 per cent or 2.86 million tonnes, according to the ADB’s working paper.

The paper, "Enhancing Asean’s Resiliency to Extreme Rice Price Volatility", also warns that if India reverts to an export ban as it liquidates its rice stocks and suffers from drought, the global rice market could tighten quickly.

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

However, the ADB’s paper has come up against the Thai government’s policy of trying to shore up prices to ensure higher incomes and better living standard for farmers. The government continues to subsidise this policy.

The ADB said that Cambodia, Laos and Myanmar had good production potential, given the availability of land and water resources, but required investments in transport 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. Last year, Thailand and Vietnam 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.

Lourdes Adriano, practice leader for agriculture, food security and rural development in the regional sustainable development department at the ADB, said the rice market appeared to be holding steady. Production estimates suggest that prices will remain stable, which is good news at a time of worry over the global corn, wheat and soybean markets.

"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," she said.

The 2007-08 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 organised by the Asean Food Security Reserve Board, the Asean Secretariat and the ADB, show regional trade restrictions pushed global rice prices up 149 per cent.

Rice-buying countries should 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.