Food security and rural livelihood: what role for trade agreements? Samarendu Mohanty, Head and Senior Economist International Rice Research Institute
2008: What a Year it was!!! Monday, March 17th, 2008 Goldman Sachs Follows Money Morning Prediction that Oil Prices Could Approach $200 a Barrel. October 13, 2008. Reuters Goldman Sachs: Crude prices could fall to $50 a barrel Current Price: hovering around $40
The F&F* Crisis: Sayonara to Free Market and Globalization? + Traders in Chicago react as Dow Jones falls below 7,000 mark. *Food and Financial
Focusing on Rice: A major staple for half of world s population
Rice Around 114 countries grow rice. Asian farmers produce about 90% of the total production.
90% of rice is also consumed in Asia
900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Rice vs Other Major Grains 66/67 69/70 72/73 75/76 78/79 81/82 84/85 87/88 90/91 93/94 96/97 99/00 02/03 05/06 08/09 000 MT Rice Corn Wheat 60/61 63/64
Global Milled Rice Production vs Trade 000 MT 450,000 400,000 350,000 Production 300,000 250,000 200,000 150,000 100,000 50,000 Trade 0 60/61 65/66 70/71 75/76 80/81 85/86 90/91 95/96 00/01 05/06
Figure 1. Dominance of Asian Rice Producers in the Global Market Rest of the World 18% United States 12% Thailand, Vietnam, India and Pakistan 70% Export Share in 2007/08, Source: USDA
Figure 2. Rice Import Dependent Countries Philippines 9% Bangladesh 6% Nigeria 6% Iran 4% Saudi Arabia 4% Rest of the world 71%
Rice Trade as a Share of Production 8% 7% 6% 5% 4% 3% 2% 1% 0% 61/62 66/67 71/72 76/77 81/82 86/87 91/92 96/97 01/02 06/07
Trade Expansion in rice Trade liberalizations in many countries in the late 80s. Followed by WTO Agreement in the mid 1990s Tariffication and border protection reduction Removal of import quotas, bound tariffs. Minimum Access Commitments Japan, South Korea. Rising trust between/among countries for their rice food security
Monthly export price (US$/ton FOB) of Thai rice (5% broken), 1998 2008 (March 1998 to May 2008) Source of raw data: The Pinksheet, World Bank
Global Rice Stock-to-Use Ratio Source: USDA
Monthly export nominal price of Thai 5% Jan 2007 - Jan 2009 1000 Cambodia 1st rice exporter to lift export curb (May 2008) Bangladesh bans non-aromatic rice exports (May 2008) Thailand gov t rice-pledging scheme of paying an intervention price of 14,000 baht/ton for 2.5MnT White Paddy Rice, June 10, 2008 800 Philippines 4 th import tender, (3 rd wk Apr 2008) Vietnam lifted ban W orld rice p rice ( US$/ton) 600 Indonesia curb medium grade rice exports. BULOG allowed to export iff national stocks >3MnT, April 2008 Brazil temporary suspends rice export from April 2008 Vietnam extended ban from April 2008 to June 2008 400 200 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Egypt ban on rice export (1 April 2008 to October 2008) India allowed rice export of Pusa 1121 to Gulf countries (Oct 15, 2008) India imposed export ban on non-basmati rice (March 2008) India imposed export ban (Oct 2007) Min. export price, $425/t Vietnam imposed partial export ban (1 st wk Sep 2007) Source: Reuters; Gain Report, USDA; Trade and Markets Division, FAO and The Pinksheet, World Bank (last accessed on February 2009
Monthly export price (US$/ton FOB) of Thai rice (5% broken), (March 1998 to Jan. 2009) Source of raw data: The Pinksheet, World Bank
Cereal prices over last decade $/MT 122% Corn 176% Wheat 200% Rice
Global Cereal Stock-to-Use Ratio 35% to 18% Wheat 29% to 12% Corn 37% to 18% Rice
Why Such Decline in Global Cereal Stocks? Consumption has exceeded production: Six of the last seven years for wheat and corn. Five of the last seven years for rice. Reasons Corn: Expansion of biofuel production Rice and Wheat: Slowdown in yield growth
Fallout of the Global Rice Crisis Growing mistrust among exporters and importers Countries are rushing to achieve rice selfsufficiency Lowe buffer stocks keeping market on the edge End result could be lower trade and the risk of making shortage and high prices more frequent.
Slowdown in Global Paddy Yield Growth Tons/Ha USDA, Sep 2008
Source of Rice Production Growth in 21 st Century (Milled) Data Source: USDA
Global Rice Supply Outlook Less than 1% yield growth Declining rice area: usual competitors + biofuel feedstocks Range of outcomes Negative to very low production growth The obvious question becomes: How much we need?
Global Rice Usage: Per Capita vs Total Kgs/person 000 Tons
Kilograms Per capita rice consumption
Total milled rice consumption 000 MT 59 mmt
What Needs to be Done? Short-term Fixes vs Long-Term Solution Rebuild the broken trust Rice summit of exporters and importers Rebuild buffer stocks Development of real rice exporter (s) with a surplus of around 10 million tons of rice Cambodia/Myanmar (Within Asia) Africa/South America (Outside Asia)
Figure 3. Transformation of the Global Soybean Market 100% 80% 60% 40% 20% 0% 64/65 67/68 70/71 73/74 76/77 79/80 82/83 85/86 88/89 91/92 94/95 97/98 00/01 03/04 06/07 United States Brazil Argentina Rest of the world
Figure 4. Chinese Dependence on Foreign Soybeans 000 MT 50,000 40,000 30,000 20,000 10,000 0 64/65 68/69 72/73 76/77 80/81 84/85 88/89 92/93 96/97 00/01 04/05 Domestic consumption Imports
Concluding Remarks Trade is vital in achieving food security For staple like rice, countries should maintain domestic production capacity. Bilateral/Multilateral trade agreements can also help rural development. Need to address three major constraints faced by the rural population for market access: physical constraints, Capacity constraints and policy constraints (source: IFAD)