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April 21, 2008 Source:  www.AsiaEcon.org Thailand is more than ever the leading rice exporter in the world. It is now working vigorously to fulfill rice demands and honor all contracts which comprise 9 million tonnes of rice.


April 21, 2008 

Source:  www.AsiaEcon.org 

Thailand is more than ever the leading rice exporter in the world. It is now working vigorously to fulfill rice demands and honor all contracts which comprise 9 million tonnes of rice. Asia is currently facing a major inflation. It is particularly reflected in prices of commodity products such as rice. In an effort to regulate local rice soaring prices and avoid shortages, the governments of India and Vietnam, major Asian rice growing countries, have banned exports. In so doing, this curb on rice exports has skyrocketed the price of rice in the rice world market, since it has created artificial shortages.

Vietnam has reached its highest consumer price inflation rate since the early 1990s with a 19.4 percent increase. The wholesale-price inflation in India rose 7 percent in a year, a peak that has not been seen since December 2004. In a similar fashion, consumer prices in China and Indonesia have rose with a figure of more than 8 percent. Other countries such as Singapore, Thailand, Hong Kong and the Philippines are also suffering from major inflation highs.

The Philippines is now facing a rice crisis, hence it is highly dependent on rice imports. It is estimated that it will need at least 1.9 million tonnes of imports this year to fulfill its population rice demand. The Philippines has been forced to buy rice at much higher prices from Thailand and it will have to sell it to its inhabitants at state subsidy prices. The total estimated costs will represent 1 percent of its GDP.

Due to this overwhelming demand of rice, Thailand has increased its rice exports by 166.2 percent. This is a two fold increase from last year. As a result of high demand and insufficient supply, the prices of rice have escalated. Thailand’s 100 % white rice rose from USD360 a tonne to USD854 and it is predicted to set a record of USD1,000 a tonne. Thai’s Jasmine rice is at this point the world’s most expensive rice; with a cost of USD1,130 per tonne.

Thailand is currently encountering exports setbacks, since local farmers are reluctant to let go of their paddy rice, given that they are facing short supplies in the local rice market and are also apprehensive about soaring prices. There are some rumors that farmers are now hiring patrols to protect their rice due to the recent disappearance of 200,000 tonnes of rice worth USD100 million from national warehouses. In order to avoid national shortages, the Thailand government came up with a “mortgage programme” for the 2007-2008 rice seasons, in which the authorities planned to purchase rice at a gainful price to fill its warehouses. Unfortunately, they only received 240,000 tonnes of rice. They expected 8 million tonnes. Thailand consumes 8-9 million tonnes of rice per year, about 55 percent of its total output, and it is expecting to harvest 6.5 million tonnes between April to June of this year.   The Thailand government is currently storing 2.1 million tonnes of rice, therefore it will need to limit its exports below 9 million tonnes annually or approximately 650,000 tonnes of rice each month to avoid shortages. 

The Asian countries banning rice exports have encountered criticisms about their policies. Some experts suggest this export ban policy is not wise, and that the rice-exporting Asian countries should reassess their policy. Further criticisms are: (1) banning rice exports is starving its neighbors; (2) lower quality rice seeds will be produced because of lack of international competition; and (3) Asian countries supporting the ban on rice exports risk losing their former clients.

Other alternatives have been suggested for example, starting a new green revolution in which production zoning, increasing yields and upgrading irrigation systems would occur. Furthermore, research on genetically modified (GM) Golden Rice is taking place in the Philippines. This new form of aerobic rice will produce 20% more grain for less amount of water.

Source:  www.AsiaEcon.org

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Source: www.asiaecon.org |

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