Global rice prices about to rise- A GNA Feature

Accra, Nov. 27, GNA - Strong signals emerging out of Asia, the world's main rice basket, indicate that the world may be on the brink of yet another food crisis, driven, this time, mainly by disappointing shortfalls in crop harvests.

The trend will lead to a sharp rise in imports by two of the biggest rice consumers on earth - India and the Philippines. The Philippines, by far the world's biggest consumer and importer of rice, who has already put in tender for 1.45 million tons of rice for next year, barely a week ago indicated intentions of buying an additional 1 million metric tons of the staple grain before the end of the year - a move which economists say will certainly exert pressure on global supplies and force prices up.

The Philippine government's move is intended to fill a larger-than-usual shortfall in crop after the country lost 1.3 million tons of grain in recent storms; if the government does go ahead with the emergency purchases by mid-December as food market observers widely expect, Philippines' planned 2010 import will shoot up to 2.45 million tonnes, totalling about 8.3 percent of estimated global trade in rice. The export price of the regional benchmark of top grade rice from Thailand, the world's biggest shipper, has already risen by 6.9 per cent from this year's low of $525 a ton in October. The price announced weekly by the Thai Rice Exporters Association was set just over a week ago at $561 a ton.

It is significant that when similar trends unfolded in May 2008, the price per tonne for rice hit a record $1,038. In the heat of the surge in global prices, the Philippines imported a record 2.4 million tons of rice to beef up domestic supplies. In her very first tender for 2010 supplies, made only last month, the Philippines' National Food Authority (the state food buyer) is reported to have purchased a total of 250,000 tonnes of rice; 100,000 tonnes of this was bought from Daewoo International for $468.50 a tonne, while 150,000 tonnes was bought from Thailand's Vinafood 2 at $480 per tonne. The Authority's Director, Mr. Romeo Jimenez, has gone on record as making it clear that, his country intends to secure supplies 'ahead of everybody else', in view of the prevailing circumstances.

But even far more threatening to the stability of global rice prices is the likelihood of India, the world's second largest grower as well as consumer of rice, to import as much as three million tonnes of the grain in the coming months.

Barely a week ago, Indian Finance Minister, Mr. Pranab Mukherjee, confirmed fears that the South Asian country's summer crop season may have been severely afflicted by this year's erratic monsoon and made even worst by floods, which hit certain parts of the country, forcing total food-grain output for India to crash down by 14 to 15 million tonnes. India's production during the 2008-09 summer crop season stood at 84.4 million tonnes as compared to an estimate of 69.45 million tonnes for this year's season.

Having thus lost as high as 18 per cent of her total crop, India may have to import as much as three million tonnes over the next year to make up for the shortfall, a necessity which economists at the International Rice Research Institute in India say would make India a net importer of rice for the first time in 21 years.

India is reported to have already contacted the Thai and Vietnamese governments for imports of rice to ensure that there is no shortage on the domestic market. India's top food procurement agencies, including MMTC, STC and PEC are known to have already floated global tenders for rice imports although all the 18 bids received so far and which range between $373 per tonne to $599 per tonne were considered as high. In October 2009, in an ostensible move to encourage and attract private capital into the importation of rice, the Indian government instituted a tax moratorium, which involved the complete scrapping of India's 70 per cent import duty on rice for up till September 2010, as a means of stabilising domestic prices in anticipation of major hic-ups in world prices. There are also indications that several other countries around the world like Iraq, Iran and Cuba have sensed danger ahead and are looking to make significant purchases, notably from Thailand and Vietnam. It is widely feared that tenders for such huge volumes of rice imports over a relatively short period of time will definitely drive up prices on the international market, a concern shared even by the management of Vinafood 2, Vietnam's biggest exporter of the grain. For many countries in West Africa where rice is a major stable, it could be dangerous to ignore these signals or downplay the full implications of these disturbing developments.

It was barely a year ago that the world went through its latest food crisis in which the scarcity, as well as shortage of food grain was a major catalyst.

Africa in particular, was worst hit in the last food crisis because most of the countries were caught unprepared and subsequently lacked the most basic contingencies for the crisis; thus in certain parts of the continent - specifically in West Africa and including countries like the Ivory Coast, Burkina Faso and Cameroon - so severe was the food crisis that it degenerated into rioting and street brawling, threatening socio-economic stability.

It is instructive to recall that at the time, as an antidote to the crisis, many African countries, including Ghana, took radical steps to stabilize domestic prices and moved to insulate them from the escalating international prices by slicing down duties and importing rice and wheat to guarantee a reasonable measure of food grain availability. 27 Nov. 09