TRADE-ASIA: Thais Try to Stop Price War on Rice Exports

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Sep 25 2002 (IPS) - Thai officials are hoping that an October meeting here between Asia’s leading rice-exporting countries will sow the seeds of a solution to the thorny issue of price-undercutting in the global rice trade.

Thailand’s interest in pushing for the Oct. 9 Rice Cooperation Meeting is hardly surprising, since the cheaper supply of rice by its competitors threatens to dislodge it as the world’s leading rice exporter.

“What is needed is cooperation between the rice exporting countries, given the current rice market,” says an official at the Thai ministry of commerce.

“We are hoping that the meeting will result in an open exchange of information on production, agriculture policies, stocks for export, prevailing competition and prices,” he adds.

The October meeting will be attended by food and trade ministers from Asia’s five major rice exporters: Thailand, India, China, Pakistan and Vietnam.

The five countries account for nearly 70 percent of the world’s rice trade, which the Food and Agriculture Organisation (FAO) estimates to be in the tune of 25 million tonnes this year, a million tonnes higher than 2001.

A look at the rice prices of the different exporting countries shows the variety in the amounts they quote for selling the staple, 90 percent of which is produced and consumed in Asia.

Currently, Indian rice sells for 135 U.S. dollars per tonne as opposed to the 200 dollars per tonne for a variety of Thai rice.

Vietnam has a rice variety that is sold at 191 dollars per tonne, and Pakistan sells rice ranging from 170 dollars per tonne to 370 dollars per tonne.

Thailand, as the world’s leading rice exporter, is expected to ship close to 7.5 million tonnes to foreign markets, the Rome-based U.N. food agency says in its August edition of the ‘Rice Market Monitor’.

The lead taken by Thailand to host the October meeting comes after the failure of a previous effort it initiated at the beginning of 2001 to achieve a measure of cooperation.

On that occasion, only Thailand and Vietnam were involved in creating what Bangkok termed “a rice pool”, in effect a rice cartel that aims to stabilise world rice prices. Others such as China, India, Pakistan and Burma showed less interest in the idea.

But Thailand’s latest effort to achieve stability in the global rice trade is winning support from some quarters.

The October meeting is “extremely timely, (we are) concerned with the livelihood and food security in the region,” says Ashvin Dayal, the East Asia regional programme manager at Oxfam, the British development agency.

Over the past 12 months, the Asian region has witnessed “the kind of downward undercutting taking place (in rice prices) as a result of lack of cooperation,” he adds, pointing to the stiff competition between India, Vietnam and Thailand to supply rice to the Philippines.

A Thai rice exporter also sees some merit in Bangkok’s effort to host the meeting if “price under-cutting” is taken up during the sessions.

“The government must urge cooperation between exporting countries to avoid the way prices are reduced to get a larger slice of the market,” says Vichai Sriprasert, president of the Thai Rice Exporters Association.

But there are sceptics who question such a push toward cooperation, saying it will be far too difficult to sustain it over the long term. They are also questions about who will line up behind the Thai initiative.

“The rice market is very thin and cannot be controlled and the trade volume is low,” says Somboon Siriprachai, an economist at Bangkok’s Thammasat University.

“The price of rice has been declining since 1980 and (Thailand) should accept the competition and shift to other products,” Somboon says.

“For this type of cooperation to succeed, you need to have a lot of exporting countries agreeing to common terms,” adds Concepcion Calpe, a senior rice commodity specialist at the FAO.

Calpe doubts that India will sign up, given the strides it has made in the global rice trade over the past two years, including coming within striking distance of Thailand’s dominance of the market.

India’s achievement, says Calpe, stems from subsidies pouring into the farming sector, which allow farmers to sell their product at a lower price to stay competitive.

An Indian government official, however, denies that India’s rice prices, which at 135 dollars a tonne are the lowest on the global market, have benefited from government subsides.

But certainly, “India’s presence in the market over the last two years is being felt by other countries,” adds Calpe. “Other rice exporting countries are losing their traditional markets due to the prices at which India is selling its rice.”

The FAO’s ‘Rice Market Monitor’ reflects that view, too. “As for exports in 2002, competition for international market shares has intensified with India forecast to make further inroads,” the report states.

Thai trade officials are hoping that some of these issues will surface at the October meeting, since Bangkok wants it to “be open and informative”.

Thailand, according to him, will be circulating a “concept paper” on how Asia’s rice exporting nations could jointly achieve results that would satisfy the rice farmers, the export sector and the countries importing rice.

“Rice farmers,” he adds, “have been affected by the fluctuating prices. They need to get a good deal.”