Too much rice in Asia can be damaging

In a recent article by The Wall Street Journal, it stated that “Asia is awash with rice. Such a statement contradicts the region’s status a few years ago when the global food price spikes occurred. During the 2007-2008 period, the rice supply was limited and disrupted by the implementation of export bans by major exporting countries such as India and Thailand. However, according to the International Grains Council, world rice stockpiles are expected to increase by 2 per cent this year. At the same time, favourable weather and government support to encourage increased production has resulted to a bumper crop. On the other hand, demand has weakened in major rice importing countries such as the Philippines and Indonesia. Currently, India and Thailand have 48 million tonnes (combined) of rice stockpiled in its warehouses.

This should be good news for consumers since an oversupply should lead to a decrease in the prices. Food prices may have decreased but they still remain high compared to their pre-2007 prices. The World Bank Food Price Watch has noted that the price of rice (Thai 5% broken rice) has sustained monthly decreases and stands 4 per cent below February levels. Despite this, most consumers are still not able to experience this positive change brought about by an oversupply of rice in the region. For instance, consumers in Thailand are still paying more for the rice in the market since the government does not want to sell the rice procured from farmers at a lower price. At the same time, hunger is still prevalent in rice exporting countries such as India and Pakistan. In the 2012 Global Hunger Index report, India and Pakistan has scores of 22.9 and 19.7, respectively. The former’s score is classified as alarming while the latter is serious.

The decline in rice prices also has serious implications for smallholder rice farmers. First and foremost, this implies a decrease in income. Diversifying to high value crops may take time and requires further investments on the part of the farmers. This is further exacerbated by the fact that access to credit and information to improve farming practices are limited. Chances of improving their productivity are slim. Second, an often neglected fact is that farmers are consumers too. The decline in income also leads to the reduced consumption of other goods and services such as education and health. Hence, the decline in prices may not be favourable for farmers as well since there are repercussions to their welfare.
The rising volume of rice stocks may be good for the attainment of food security in Asia. However, the issues of physical and economic access still prevail. This brings about a great balancing act for governments to take into consideration the plight of the smallholders and small farmers of rice and at the same time, make food economically accessible to consumers. The implementation of producer and consumer subsidies can be tempting for such situations but these require careful planning and targeting. Poorly targeted subsidies may not help the poor in the end and distort market prices and agricultural production. In the end, government may also incur an unhealthy fiscal bill. The current situation in the Asian region highlights the delicacy of both producers and consumers to government policies and interventions. It warrants a systematic approach that would cater to the welfare of both groups and not just “band-aid” solutions.

This blog post has been written by Maria Carmencita S. Morales. Maria Carmencita is an Associate Research Fellow at the RSIS Centre for Non–Traditional Security (NTS) Studies.