Rise in Rice Price

From Bangladesh to the Philippines, from India to Indonesia, the the price rise of food grains, like rice is a bad news. They seek to balance price rise with the measures of feeding hungry populations and averting social chaos.

Every Asian government is well aware of the close relationship that exists between political stability of the government and the stability of the prices of essential commodities like food grains. So every government in the South Asian region has been doing all it can to maintain price stability, particularly for basic food grains.

At the end of February, Thailand's benchmark rice was trading at more than 500 dollars a tonne, a rise of more than 100 dollars from a month earlier and up from just 325 dollars a year ago. Exporters in Vietnam meanwhile were setting prices at 460 dollars a tonne last month, up more than 50 percent from a year ago.

The whole crisis is not a region specific issue but a global issue. All cereal prices are going up, as per data released by the UN Food and Agriculture Organisation. In the first two months of 2008, Vietnam's rice exports brought in 150 million dollars, an increase of 78 percent from a year ago. Much of the output is destined for the Philippines, which has asked for a guarantee of stable supplies. Unable to meet its own needs, the Philippines will import up to two million tonnes of rice this year, according to the government. Last year its harvest was 6.44 million tonnes. ,

To ensure stability, a government agency in Indonesia buys and releases stocks and sets import duties. Heavily subsidised rice is also sold to millions of the poorest families, yet even those prices are rising. No one wants to be left without adequate stocks, and that contributes to driving up the price. They're willing to pay a higher price for future deliveries because they don't want to be caught short.

In Bangladesh, which has a population of 144 million, the price of rice has doubled in a year, vastly outpacing income levels. People are cutting all their other spending to focus only on food. They have to survive on a pittance, and the rises are causing a general feeling of gloom and depression. This year Bangladesh will need to import some three million tonnes due to damage caused by floods in mid-2007 and November's devastating cyclone. Some of that is coming from neighbouring India, but otherwise New Delhi has halted exports of non-basmati rice to keep its own domestic prices in check. India allowed the export of 3.2 million tonnes of non-basmatic rice in the first half of the current financial year, but since October no new contracts have been signed. The move has upset the All India Rice Exporters' Association.

China, Japan and South Korea are largely self-sufficient and protect their rice sectors via steep import tariffs or heavy subsidies. In Japan, the price of high-quality rice is even waning with falling demand as younger Japanese turn to bread and Western-style dishes. It is now for the South Asian countries to gear up themselves to face the crisis and maintain food security.