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The
intolerable surge in rice prices presents Asia with a
rather unpleasant dilemma.
Rough
rice prices have doubled in the past year on the Chicago
Board of Trade.
Nutritionally, it’s the most important cereal for the
Asian region, supplying between a quarter and 73 percent
of all calories consumed in China, India, Pakistan,
Bangladesh, Indonesia, Thailand, Sri Lanka and Cambodia,
according to the International Rice Research Institute (IRRI)
in Manila.
It will
be unconscionable for Asian governments to pass on the
full international cost of rice to their people; that
could end up driving to destitution the 600 million
people in the region who live on less than $1 a day.
On the
other hand, as governments in Asian rice-growing regions
try to shield their urban poor through price controls or
export bans, the risk is that the signal to farmers to
boost production will either become weak or even be lost
completely.
And that
could prolong the shortage for everyone else because
Asia is also the biggest exporter of the commodity.
Just
four countries—Thailand,
India, Vietnam and Pakistan—accounted for 70 percent of
the 30 million tons of the global trade in rice last
year. With the exception of Thailand, the others have
all decided to restrict exporters from supplying freely
to the world market. Vietnam, however, has hinted at
relaxing its export ban in anticipation of a good crop.
Policymakers in Asia are hoping that farmers will
respond to $1,000-a-ton rice and grow more of it; at the
same time, they can’t let their own consumers pay
anywhere close to that amount, for that would cause food
riots and topple governments.
Stagnant
yields
Taking
the hit entirely on the government’s budget isn’t an
option for most of these countries.
So how
does public policy protect consumers and government
finances from ruin, and yet encourage farmers?
That’s
the challenge confronting Asian nations.
Complicating matters, yields aren’t rising quickly
enough even to compensate for population growth.
“In the
major rice-growing countries of
Asia, yield growth over the past five to six years has been
almost nil,” says the Manila-based IRRI. “Globally,
yields have risen by less than 1 percent per year in
recent years.”
In the
absence of a significant pickup in yields, rice farming
in Asia is fast becoming an unviable proposition.
It costs
about 5,350 rupees ($125) in seeds, fertilizers, labor
and interest charges to grow 1 ton of paddy, or unmilled
rice, in the southern Indian state of Andhra Pradesh.
Growing
risks
The
government last year paid farmers $175 to $180 per ton
to buy their crop for the public-distribution system.
For such a puny profit, who would want to grow paddy?
That
isn’t all. Prices for phosphate-and potassium-based
fertilizers have doubled this year, and with crude oil
rising to more than $130 a barrel, an early respite
isn’t in sight.
The cost
of transporting rice from producing to consuming centers
is also increasing.
Besides,
with global warming, there’s a growing risk of adverse
weather conditions turning the farmers’ small profit
into a big loss. Access to crop insurance remains
limited. And that makes farming an even riskier business
than before.
Myanmar’s
rice-sowing season has already been disrupted by Cyclone
Nargis, which has killed more than 77,000 people,
according to the official death toll.
Paddy
farmers in the southern Indian state of Kerala sold
their output for a fraction of the open-market price
after heavy rains in March damaged the crop, which was
ready for harvest.
Boosting
profits
Unless
farmers are allowed to receive a substantially higher
price for their produce, they don’t have much of an
incentive to bring a bigger crop to the market.
With
risks being so high and returns low, it makes little
sense for a small farmer to rent land to grow rice. He
would rather go looking for a wage laborer’s job in the
city.
This
trend, which is seen in various degrees across Asia, is
also borne out by India’s census statistics. Out of the
additional 50 million people who were engaged in farming
in 2001, compared with 1991, as many as 41 million were
women.
The men
are leaving the farm, and they are doing so because
agriculture doesn’t pay.
The
crisis in rice won’t end without making farming more
profitable in Asia. Much progress can be made toward
that objective even as the world awaits a second Green
Revolution, which may or may not happen.
For a
start, improvements are needed in building up storage
capabilities, especially in countries such as
Cambodia
that produce a surplus but don’t have adequate
warehousing capacity. Efficient land-lease markets will
permit consolidation among small landowners, boosting
economies of scale and profits.
A rice
cartel in East Asia, an idea proposed by
Thailand,
was a harebrained plan. Thankfully, it has been dropped.
Solutions needed to balance the interests of the
vulnerable Asian consumer and the distressed rice farmer
must be more inventive—and less fanciful. |
