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Stabilizing rice price a sticky
problem
By Marwaan Macan-Markar
BANGKOK - While Asia's leading rice-exporting
countries have agreed to back a Thai initiative to
coordinate the world's rice trade, one of the key
elements of this unprecedented move - promoting export
price stability - promises to be a daunting task.
At a meeting here this week there was sufficient
evidence of the challenge that lies ahead in the way
some ministers couched their language.
They
avoided talking about the specific details that would
give teeth to a mechanism aimed at achieving such an end
- price stability - through the possible formation in
the future of a Council on Rice Trade Cooperation
(CRTC).
"We want price stabilization. Exchanging
information will be vital for this," Abdul Razak Dawood,
Pakistan's minister of commerce, said shortly after the
one-day meeting he had with his counterparts ended on
Wednesday.
"These discussions were held with the
aim of removing all the anomalies of fluctuating rice
prices," said V Sreenivasa Prasad, India's minister of
state for consumer affairs, food and public
distribution.
The lack of specifics was evident
in the official line, too, that emerged from the
ministerial meeting with the five countries - China,
Vietnam, India, Pakistan and host Thailand.
Officials involved in the meeting said it is too
early to work out the mechanisms to stabilize global
rice prices.
However, the Rice Trade Cooperation
meeting got under way with a clear recognition of the
seriousness of this issue. The current rice trade
situation in the world market is a "critically important
issue", Adisai Bodharamik, Thailand's minister of
commerce, said in his opening remarks. "The goal of this
meeting is to find ways and means to secure price
stability for all types of rice that are produced in all
our countries," he added.
Among the hurdles this
Thai-led initiative will have to surmount is the cost of
sustaining a mechanism to achieve price stability, say
experts in the field.
"The costs of running such
schemes might be very high for governments and outweigh
the potential benefits producers could get," said
Concepcion Calpe, a senior rice commodity specialist at
the Food and Agriculture Organization (FAO), a
Rome-based United Nations agency.
Mechanisms
aimed at achieving price stability for such commodities
as rice will require a "high degree of commitment by its
members and a mechanism for policing their actions", she
added.
She pointed out that while attempts to
achieve price stability through agreed mechanisms may
work in the short term, it may not be sustainable over
several years. "Because importers and non-participating
exporters could react to a rise in prices stemming from
the scheme by increasing their own production."
Currently, India offers rice at the lowest price
on the world market, with one brand going for US$135 per
ton, as opposed to a higher-quality brand from Pakistan,
which is sold at close to $370 per ton. Thailand,
meanwhile, has a brand of rice marketed at $200 per ton
while a Vietnamese rice variety is sold at $191 per ton.
The five countries that are party to this rice
cooperation agreement account for close to 70 percent of
the world's rice trade, which, according to FAO
estimates, is expected to be about 25 million tons this
year.
Thailand is the world's leading rice
exporter, with some 7.5 million tons of rice billed for
the overseas markets this year. According to the FAO,
India is expected to take second place this year, with
an estimated 4 million tons of rice, nudging Vietnam
from the No 2 slot it had held during recent years.
The regular practice of price undercutting in
the global rice trade was what triggered Thailand to
push for the rice cooperation initiative, and follows a
failed attempt by Thailand last year to create a "rice
pool", in effect a rice cartel to stabilize world rice
prices. Only Vietnam supported Thailand then.
Yet the countries backing the new Thai-led
initiative may see in the current crisis faced by the
world's coffee farmers the tough road ahead in achieving
their twin objectives of securing price stability and,
through it, the protection of rice farmers.
And
that comes after coffee enjoyed a price-stabilizing
system set up under the international coffee agreement
in the 1960s, but this arrangement came apart after the
United States pulled out in 1989.
Today, the
coffee sector in developing countries is in crisis,
states the London-based International Coffee
Organization (ICO). "Prices on world markets, which
averaged around 120 US cents per pound in the 1980s, are
now 50 cents, the lowest in real terms for 100 years."
Oversupply of this commodity is one of the
factors forcing prices down, consequently pushing into
dire poverty coffee producers in the developing world
who are forced to sell below cost.
"Rice is a
far more complex issue than coffee when it comes to a
price-stabilizing system," said Alex Renton, spokesman
for the Southeast Asia division of Oxfam, an
international development agency that has just released
a study on how the coffee crisis has affected Third
World producers.
The FAO's Calpe shares this
view. If, for instance, price stabilization leads to an
increase in the price of rice, there is nothing to stop
consumers from shifting to an alternative grain or
changing their consumption patterns, she said.
But, as Wednesday's meeting revealed, the
ministers from Asia's leading rice-exporting countries
are prepared to give the Thai initiative a chance to
sprout shoots. According to Adisai, the Thai minister,
"our five countries made history by agreeing to stick
together to do something about rice prices".
(Inter Press Service)
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