ASIA: Rice-exporting Nations Still to Sow Price Stability Plans

By Marwaan Macan-Markar Reprint | | Print |

Analysis - By Marwaan Macan-Markar

BANGKOK, Oct 10 2002 (IPS) - While Asia’s leading rice exporting countries have agreed to back a Thai initiative to co-ordinate the world’s rice trade, one of the key elements of this unprecedented move – promoting export price stability – promises to be a daunting task.

At a meeting here this week there was sufficient evidence of the challenge that lies ahead in the way some ministers couched their language.

They avoided talking about the specific details that would give teeth to a mechanism aimed at achieving such an end – price stability – through the possible formation in the future of a Council on Rice Trade Co-operation (CRTC).

”We want price stabilisation. Exchanging information will be vital for this,” Abdul Razak Dawood, Pakistan’s minister of commerce, told IPS shortly after the one-day meeting he had with his counterparts ended on Wednesday.

”These discussions were held with the aim of removing all the anomalies of fluctuating rice prices,” V. Sreenivasa Prasad, India’s minister of state for consumer affairs, food and public distribution, said in an interview.

The lack of specifics was evident in the official line, too, that emerged from the ministerial meeting with the five countries – China, Vietnam, India, Pakistan and hosts Thailand.

Officials involved in the meeting said it is too early to work out the mechanisms to stabilise global rice prices.

However, the Rice Trade Co-operation meeting got underway with a clear recognition about the seriousness of this issue. The current rice trade situation in the world market is a ”critically important issue,” Adisai Bodharamik, Thailand’s minister of commerce, said in his opening remarks.

”The goal of this meeting is to find ways and means to secure price stability for all types of rice that are produced in all our countries,” he added.

Among the hurdles this Thai-led initiative will have to surmount is the cost of sustaining a mechanism to achieve price stability, say experts in the field.

”The costs of running such schemes might be very high for governments and outweigh the potential benefits producers could get,” says Concepcion Calpe, a senior rice commodity specialist at the Food and Agriculture Organisation (FAO), a Rome-based U.N. agency.

Mechanisms aimed at achieving price stability for commodities like rice will require a ”high degree of commitment by its members and a mechanism for policing their actions,” she adds.

She points out that while attempts to achieve price stability through agreed mechanisms may work in the short term, it may not be sustainable over several years. ”Because importers and non-participating exporters could react to a rise in prices stemming from the scheme by increasing their own production.”

Currently, India offers rice at the cheapest price on the world market, with one brand going for 135 U.S. dollars per tone, as opposed to a higher quality brand from Pakistan, which is sold at close to 370 dollars per tonne.

Thailand, meanwhile, has a brand of rice marketed at 200 dollars per tonne while a Vietnamese rice variety is sold at 191 dollars per tonne.

The five countries who are party to this rice co-operation agreement account for close to 70 percent of the world’s rice trade, which, according to FAO estimates, is expected to be around 25 million tonnes this year.

Thailand is the world’s leading rice exporter, with some 7.5 million tonnes of rice billed for the overseas markets this year. According to the FAO India is expected to take second place this year, with an estimated 4 million tonnes of rice, consequently nudging Vietnam from that slot it had held during recent years.

The regular practice of price undercutting in the global rice trade was what triggered Thailand to push for the rice co-operation initiative, and follows a failed attempt by Thailand in 2001 to create a ”rice pool,” in effect a rice cartel to stabilise world rice prices. Only Vietnam supported Thailand then.

Yet the countries backing the Thai-led initiative may see in the current crisis faced by the world’s coffee farmers, the tough road ahead in achieving their twin objectives of securing price stability and through it the protection of rice farmers.

And that comes after coffee enjoyed a price stabilising system set up under the international coffee agreement in the 1960s, but this arrangement came apart after the United States pulled out in 1989.

Today, the coffee sector in developing countries is in crisis, states the London-based International Coffee Organisation (ICO). ”Prices on world markets, which averaged around 120 U.S. cents per pound in the 1980s, are now 50 cents, the lowest in real terms for 100 years.”

Over supply of this commodity is one of the reasons forcing prices down, consequently pushing into dire poverty coffee producers in the developing world who are forced to sell at below cost.

”Rice is a far more complex issue than coffee when it comes to a price stabilising system,” says Alex Renton, spokesman for the South-east Asia division of Oxfam, an international development agency that has just released a study on how the coffee crisis has affected Third World producers.

The FAO’s Calpe also shares this view. If, for instance, price stabilisation leads to an increase in the price of rice, there is nothing to stop consumers from shifting to an alternative grain or changing their consumption patterns, she says.

But, as Wednesday’s meeting revealed, the ministers from Asia’s leading rice-exporting countries are prepared to give the Thai initiative a chance to sprout shoots. According to Adisai, the Thai minister, ”our five countries made history by agreeing to stick together to do something about rice prices.”

ASIA: Rice-exporting Nations Still to Sow Price Stability Plans

By Marwaan Macan-Markar Reprint | | Print |

Analysis - Marwaan Macan-Markar

BANGKOK, Oct 10 2002 (IPS) - While Asia’s leading rice exporting countries have agreed to back a Thai initiative to co-ordinate the world’s rice trade, one of the key elements of this unprecedented move — promoting export price stability — promises to be a daunting task.
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