The rice price boom



By Afshan Subohi


THE benefits of the boom in the international commodity prices have started trickling down to peasants and farm labour located in dusty hutments in the countryside, many oceans away from bustling trading centres in the West. Such are the linkages and dynamics of the modern global trade.

The surge in demand for commodities from prospering China and its growing appetite for edibles such as rice has sent prices of these commodities spiraling in the international market, tilting the terms of trade, after long last, in favour of commodity producing developing world.

As rice prices touched historical highs rising by over 50 per cent in the last two weeks in global markets, Asian and African importers (the grain is a staple food in the region) revisited their strategies of securing supplies, to head off social unrest in case of shortages. This added to the demand pressure on supplies and sent prices skyrocketing.

Currently coarse rice is traded at $600 to $650 a tonne. Thai medium quality rice, a global benchmark at $850 up from $760 a tonne last week, while the price of less representative top-quality rice broke the $1,000 tonne level for the first time, international wire services reported quoting traders.

The commodity analysts expect the trend to persist in the international market in the short to medium- term.

Is Pakistan’s rice economy strong enough to join the band of nations benefiting form rising prices? How is the benefit shared along the rice value chain? These and related questions were posed to stakeholders in rice trade to understand the impact of the phenomenon, its affects and lessons for a country struggling to cope with multi-faceted issues.

“Pakistan produces approximately 5.5 million tonnes of rice against 2.5 million tonnes of local demand with about three million tonnes available for exports each year. This year shorter supply of Indian rice in international market opened up more avenues for Pakistan and the country with export channels capitalised on the situation”, Dr Qadir Bux Baloch, Executive Agriculture Commissioner, ministry of agriculture and livestock told Dawn from Islamabad.

The rice belts in Sindh and Punjab, though distinct from each other, have consistently been managing the crop for decades. Punjab produces finer quality rice with huge domestic market but comparatively limited scope in international market. The finer Basmati rice market is almost monopolised by India. Sindh produces lower quality coarse rice that is priced lower but has bigger market overseas.

An informal survey by Dawn to determine the share in the export price premium across the value chain of the rice trade revealed that gains were proportional to scales and weightage of each segment with commercial exporters in the lead and actual grower at the other extreme. As there was no integrated company controlling sizeable proportion of the rice trade, the gains seem to be widely shared.

“Everyone along the value chain of rice trade benefited over the last one year. However, the share of stockists, transporters and exporters is probably more than others. Right from the tillers to the feudals, from Arthis (wholesaler) to exporters, from loaders to transporters, from local godown owners to those who operate huge warehouses in cities, from those operating manual husking petty machines to modern husking plant owners mostly situated in Punjab, from truckers to operators of shipping lines all got a piece from the price premium pie”, a local dealer in commodities at the wholesale in Hyderabad told Dawn.

He said that in Sindh the unit of weight for paddy is Kharar that is constituted of 20 lots of 40kg of paddy. He said that last year June crop fetched Rs4,800 to Rs5,000 per Kharar, Nov-Dec paddy was picked up at Rs10,000 to Rs11,000 and farming community of Sindh is expecting to sell the current crop that will hit the market in May-June at Rs13,000 to Rs15,000 per Kharar.

He said that it was difficult to estimate the gain to the tillers in percentage term as the land along the rice belt is fragmented with a huge variety of arrangements between the land owners and sharecroppers. In the harvesting season, there is movement of labour from the Saraiki belt of Punjab towards rice-growing areas. “There is no labour shortage in Sindh still contractors managing harvesting of the crop prefer to bring in farm labour from outside for they find them to be more productive than natives”.

Interestingly the crop is moved by big transporters from upcountry. These traders through their agents pick up the crop to be stored in warehouses in urban areas predominantly situated in Karachi, from where chunk of the produce is moved to Punjab for processing that include husking and polishing of the grain.

The location of processing units in central Punjab has increased the movement of crop to Punjab and back to Karachi for export by sea to the Middle East and African markets.

According to the people involved in the rice business, the heightened activity of rice exporters to make most of the situation has created a situation where there are fears of shortage of supply of rice seeds for the next season as windfalls from the current season encourage more people to switch to paddy or encourage traditional growers to concentrate in improving the quality of inputs to get a better yield.

The responsible officials in the ministry of agriculture termed the fears regarding any bottlenecks in supply of seed for the next rice crop baseless. “We have recently allowed entry of eight new hybrid varieties of Chinese origin to improve yield and production of rice in the country,” Dr Qadir explained.

As to why facilities have not been developed in Sindh closer to the crop growing areas despite good margin and almost captive demand was not clear. Independent experts blamed private sector which in Sindh is more inclined towards short- term investment in real estate and stocks than playing its role in industrial development. Others blamed the government for failing to devise a policy framework to divert the flow of capital to investment in industry that could have complimented its agrarian base and led to improvement in productivity levels.

The office of secretary agriculture did not respond to queries of Dawn. Dr Qadir, however, blamed it on the law and order situation that has kept people from investing in even small projects such as rice husking plants in rural Sindh.

The rural areas have a sizeable population comprising poorest of the poor. The lot was almost forgotten over decades of focus on urban-based industrial and business activity.

In the past, while the agriculture sector continued to feed the population and domestic industry, no effort was made to reorient/ modernise it in a most suitable fashion.

With the result that 60 years after gaining independence, the agriculture economy slogs at the mercy of nature and the country has failed to capitalise on the comparative advantage of agricultural produce. Take production chart of any crop over the last 30 years, the erratic movement tells the sorry tale of almost gross negligence. Many earned millions at the cost of the development of the rural economy.

How well an elected government is capable of managing economy and balancing competing interests will become clear over the next few months as details of economic programme reflecting the opted direction are revealed.

http://www.calcuttanews.net/story/348647
Exploding food prices cause worldwide panic
Calcutta News.Net
Monday 14th April, 2008

Soaring food prices are causing unrest and riots around the world.

The issue is at a boiling point, according to the head of an agency focused on global development. "This is the world's big story," Jeffrey Sachs, director of Columbia University's Earth Institute said Monday.

"The finance ministers were in shock, almost in panic this weekend," he said on CNN's "American Morning," in a reference to top economic officials who gathered in Washington. "There are riots all over the world in the poor countries ... and, of course, our own poor are feeling it in the United States."

World Bank President Robert Zoellick has said the surging costs could mean "seven lost years" in the fight against worldwide poverty.

"While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs, and it is getting more and more difficult every day," Zoellick said late last week in a speech opening meetings with finance ministers.

"The international community must fill the at least $500 million food gap identified by the U.N.'s World Food Programme to meet emergency needs," he said. "Governments should be able to come up with this assistance and come up with it now."

"In just two months," Zoellick said in his speech, "rice prices have skyrocketed to near historical levels, rising by around 75 percent globally and more in some markets, with more likely to come. In Bangladesh, a 2-kilogram bag of rice ... now consumes about half of the daily income of a poor family."

The price of wheat has jumped 120 percent in the past year, he said, meaning that the price of a loaf of bread has more than doubled in places where the poor spend as much as 75 percent of their income on food.

"This is not just about meals forgone today or about increasing social unrest. This is about lost learning potential for children and adults in the future, stunted intellectual and physical growth," Zoellick said.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, also spoke at the joint IMF-World Bank spring meeting, CNN reported.

"If food prices go on as they are today, then the consequences on the population in a large set of countries ... will be terrible," he said.

He added that "disruptions may occur in the economic environment ... so that at the end of the day most governments, having done well during the last five or 10 years, will see what they have done totally destroyed, and their legitimacy facing the population destroyed also."

In Haiti, the prime minister was kicked out of office Saturday, and hospital beds are filled with wounded following riots sparked by food prices.

In Egypt, rioters have burned cars and destroyed windows of numerous buildings as police in riot gear have tried to quell protests.

Images from Bangladesh and Mozambique tell a similar story.

In the United States and other Western nations, more and more poor families are feeling the pinch, CNN reported. In recent days, presidential candidates have paid increasing attention to the cost of food, often citing it on the stump.

The issue is also fueling a rising debate over how much the rising prices can be blamed on ethanol production. The basic argument is that because ethanol comes from corn, the push to replace some traditional fuels with ethanol has created a new demand for corn that has thrown off world food prices.

Jean Ziegler, U.N. special rapporteur on the right to food, has called using food crops to create ethanol "a crime against humanity."

"We've been putting our food into the gas tank -- this corn-to-ethanol subsidy which our government is doing really makes little sense," said Columbia University's Sachs.

Former President Clinton, at a campaign stop for his wife in Pennsylvania over the weekend, said, "Corn is the single most inefficient way to produce ethanol because it uses a lot of energy and because it drives up the price of food."

Some environmental groups reject the focus on ethanol in examining food prices.

"The contrived food vs. fuel debate has reared its ugly head once again," the Renewable Fuels Association says on its Web site, adding that "numerous statistical analyses have demonstrated that the price of oil -- not corn prices or ethanol production -- has the greatest impact on consumer food prices because it is integral to virtually every phase of food production, from processing to packaging to transportation."

Analysts agree the cost of fuel is among the reasons for the skyrocketing prices.

Another major reason is rising demand, particularly in places in the midst of a population boom, such as China and India.

Also, said Sachs, "climate shocks" are damaging food supply in parts of the world. "You add it all together: Demand is soaring, supply has been cut back, food has been diverted into the gas tank. It's added up to a price explosion."

http://www.theage.com.au/news/world/food-r...7856916221.html

Food riots to worsen, warns UN
Email Printer friendly version Normal font Large font Robin Pomeroy
April 13, 2008

FOOD riots in developing countries will spread unless world leaders take steps to reduce prices for the poor, the head of the UN Food and Agriculture Organisation has warned.

Despite a forecast 2.6% rise in global cereal output this year, record prices are unlikely to fall, forcing poorer countries' food import bills up 56% and hungry people on to the streets, FAO director-general Jacques Diouf said.

"The reality is that people are dying already in the riots," he said. "They are dying because of their reaction to the situation and if we don't take the necessary action there is certainly the possibility that they might die of starvation. Naturally, people won't be sitting dying of starvation, they will react."

Food riots have broken out in several African countries, Indonesia, the Philippines and Haiti, the FAO said. Thirty-seven countries faced food crises, it said in its latest World Food Situation report.

Increased food demand from rapidly developing countries such as China and India, the use of crops for biofuels, global stocks at 25-year lows and market speculation are all blamed for pushing prices of staples such as wheat, maize and rice to record highs.

While people in richer countries have noticed higher supermarket prices, the effect is far more pronounced in developing countries, where 50%-60% of income goes to food.

if we sell our 3m tons at $750 is $2,250,000,000


SHUKAR ALHAMDULILLAH

thats a good figure but id still save some for our local demand since we actually IMPORT wheat.I guess the question is, how much does wheat cost in the country per ton?

haroon, this is rice not wheat...and 3m tonns is the surplus, ie stuff left over after local demand...

Aoa



Doesn't that kinda look a bit... too much?

w/salaam

Don't you worry some bastard will manage to export them to Afghanistan

We are one of the biggerst exporter of rice in the world. Almost all the rice here in Australia are Pakistani rice.

yep, Pakistani rice is the the best rice available here in Malaysia, and the most expensive too.

Global food prices will triple in near future, due to the global wamming, biofuel and rising oil prices. Our economy is agricultural based to some extent so it should be good for us, but as long as we don't start straving our own people to feed others, I am happy with the exports.

shoul dwe perhaps think to use the surplus to ofset the wheat issue we are having.

why not have rice instead of roti...

you mean developing alternatives to wheat, yes work is being done on this to promote alternative ways of eating and effort is being made to change peoples eating habits, but i say no, as this is degradation of our history and culture, all that would result is promotion of non indigenous foods and death of our traditional food...but then again, history is prologue,

Pakistan may tax rice exports, buy more wheat-trader

SINGAPORE, April 15 (Reuters) - Pakistan could double its wheat imports this year and may slap a tax on rice exports to rein in inflation, trade circles said on Tuesday. As major rice exporters Vietnam and India clamp down on shipments, buyers have rushed to Pakistan, the world's fifth-largest seller, said Najib Balagamwalla, chief executive of Sea Trade, a leading Pakistan-based commodities trader. But with inflation at a 13-year high, Islamabad could join the growing list of governments seeking to tame rising prices by discouraging overseas sales. At the same time, with nearly half the country at risk of running short of food, it may buy as much as 3.5 million tonnes of wheat, he said. (Posted @ 16:50 PST)

Thats the local demand of RICE not FOOD. There is 2m ton shortage of WHEAT,that we will end up buying from outside....
If rice is soldat a much higher price than wheat,than it should be fine BUT with a crisis,what if global wheat price goes up OR there is a shortage of wheat?

BTW, one of the problem in Pk is loss of Irrigation water due to sepage and lack of storage facilites(dams).MOST OF THAT can be made up(making pipes and cement waterways rather than the KHALS we have right now). Just like the govts before it, previous govt. was unable to do anything in addressing that issue(why fix agriculture,lets develop real estate and banking, or maybe we make land owners rich??) they paid all their attention to industry and finance.
And dam construction has more to do with electricity than agricutlure.

Pakistan should be learning from Thailand (rice largest producer and exporter).

The government has regulated every bit of supply chain management of rice from top down. They are currently (against world community) trying to limit exports so that their domestic prices dont skyrocket. Once that is in control, they would be exporting rice.

On a side note, Thailand is half the size of Pakistan, and has a population of 70m.

Yes, Lining the waterways/khals with cement/concrete would save 40% more water that is being lost to seepage.

When I make contact with ordinary people they say to me that this government EXPORTS all food items and they are left with second grade food or food is hard to find in stores!! Yes this is Pakistan, where greedy people are making money and leaving ordinary people to suffer!!

This is pathetic and moronic--and this is due to this greedy son of bit-ch government!!

There is a food crisis in the world and many countries like Thailand, etc have banned export of any food items unless their people have it first!! And here--these Arse holes are making lives of ordinary people hell!! This rice should not be exported until we properly feed our people first!! People advocating exporting this rice should be ashamed of themselves!!

We need to stop all food exports to Afghanistan and India--they can go to hell and die--who cares!!

Thailand which is the largest exporter has not banned export of rice. Vietnam and India has both placed strict limitation to keep the price down at home.

The purpose of my post was to highlight what is happening in the world when it comes to food, and the greedy and basta-rdly acts of our government--and all you could do was to say "oh yeah Thailand hasn't banned anything". Please concentrate of the severity of the problem and the impotence of the Pakistan government. The following item is from the Financial Times, and clearly supports what I have been saying!!

You can highlight whatever you want but get your fact straight. Don't make a statement like "Thailand has banned export of any food item" when it isn't true.

Once again stop Whining dude--I have clearly told you what i meant, so stop acting like an idio-t!!