Dr. Randy Barker Consultant and Acting Head, Social Sciences Division International Rice Research Institute (IRRI) Thursday Seminar presented at IRRI, 24 April 2008
The 1960s and 70s. Why are world rice prices rising? A look at the future.
Cold war politics Concerns about Asian food security Shortfall in grain production in the 1960s-70s Release of IR8 in 1966 (click for background story) IRRI celebrates10th anniversary in May 1972
Prophecy No. 1 Much if not most of the rice production increase that has occurred in the last 6 years should be credited to favorable weather along with a 1% annual increase in crop area. J. Norman Efferson Dean, Louisana State University
1972=100 180 Philippines 150 Thailand 120 India 90 60 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
1000 800 Rice price at 1980 US$ Price (US$/t) 600 400 200 Urea price at 1980 US$ 0 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 Source of raw data: World Bank Year
Monday, 2 July 1973 Rice is life itself in Southeast Asia, and this year, there is not enough to go around. Last year s bad weather has turned the region s usual bare sufficiency into severe shortage. The result: smuggling, hoarding, soaring prices and hungry people.
Philippine Daily Express FAO warns of food shortage The director general of the United Nations Food and Agriculture Organization (FAO) said Monday the world is eating more grain than it is growing and he warned there is a danger of a world-wide food shortage.. The director general of the FAO said Monday the world is eating more grain than it is growing and he warned there is a danger of a world-wide food shortage. Philippine Daily Express, June 13, 1973
Rice, corn hoarders get new warning President Marcos ordered the military yesterday to arrest unscrupulous rice and corn hoarders, price manipulators, and profiteers, and the sealing of their bodegas. Philippine Daily Express, 2 June 1973
2.5 2.0 1.5 1.0 0.5 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
700 1500 Production of unmilled rice (million MT) 600 500 400 300 200 100 World Production Real price 1200 900 600 300 Real price of milled rice (2008) US$/ton) 0 0 1961 1968 1975 1982 1989 1997 2008 Year Source: Production: USDA, 14April2008 Rice Price: 2008 is average of Jan-March 2008. Relate to Thai rice 5%-broken deflated by G-5 MUV Index deflator (adjusted based on February 27, 2008 data update) Source: www.,worldbank.org
Prophecy No. 2 If the high food prices in the 1960s-70s accelerated investments in food production, which resulted to food surplus and low commodity prices in the 1980s, then the deceleration of investments since the late 1970s is a pre-condition for food shortage in the future. Hayami et al.
Supply - demand imbalance Price of other commodities Behavior of importers and exporters, traders, consumers, farmers -- speculation
Supply-Demand Imbalance in the World % growth rate Production Consumption Difference 1960-1985 2.86 2.68 +0.18 1997-2007 0.75 0.94-0.19 Sources of basic data: FAO, WRS
US$/t (fob) 600 550 500 450 400 350 300 250 200 150 Jan-90 Nov-90 Sep-91 Jul-92 May-93 Source of raw data: The Pinksheet, World Bank Mar-94 Jan-95 Nov-95 Sep-96 Jul-97 May-98 Mar-99 Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Sep-07
Rice stock (million tons) 140 Major countries 120 100 80 China 60 40 20 India 0 1990 1992 1994 1996 1998 2000 2002 2004 20062007 Source of raw data: PSD Online (www.fas.usda.gov/psdonline/psdhome.aspx), USDA, 2008
Lack of investment in R&D and rural infrastructure, plateauing of yields Rise in energy prices cost-price squeeze Pressure on resources land, labor, water, diversification, agricultural transformation Climate short term, global warming
10 8 Growth (%/yr) 6 4 2 1975-80 1981-90 1991-00 0-2 Asia Latin America SS Africa Developed D. Byerlee et al., www.worldbank.org/wdr2008 Dobermann, 2008
Legend: Vertical bar represents area Horizontal line represents yield Yield (t/ha) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 China Asia India 150 140 130 120 110 100 90 80 ASIA: Rice area (million h 0.0 1990/1991 1992/1993 1994/1995 1996/1997 1998/1999 2000/2001 2002/2003 2004/2005 2006/2007 70 Source of basic data: USDA, 1990-2007
Country Asia China India Indonesia Bangladesh Vietnam Thailand Myanmar Philippines Brazil Japan Source of raw data: USDA 2008, PSD online 04-16-2008 Production (000 tons) 2005-2007 569,888 182,721 139,584 54,656 43,083 34,812 27,753 18,586 15,541 11,654 10,977 Yield growth rate (%/year) 1997-2007 0.61-0.17 1.09 0.95 2.96 2.23 1.24-0.95 3.13 3.28 0.04
Global growth in population, consumption Regional growth in consumption compared to production Africa and the Middle East Price of other food crops wheat, maize commodities in general
7,000 1990 2007 6,000 5,000 000 MT 4,000 3,000 2,000 1,000 - South Asia Southeast Asia East Asia Sub-Saharan Africa Middle East Latin America Europe Other America Source of basic data: USDA: TY Imports, Last accessed 14 April 2008
Growth in consumption outpaces growth in production in Africa and the Middle East Consumption Production Source of basic data: USDA, 1960-2007c
Supply - demand imbalance Price of other commodities Behavior of importers and exporters, traders, consumers, farmers -- speculation
Sharp increase in commodity Prices Rice Soya Wheat Corn 31% 74% 87% 130% Source: Bloomberg, except rice: FAO/Jackson Son & Co.
US$/t 700 Monthly world price of commodities, Sep 2005 to Mar 2008 600 500 Rice, Thailand, 5% 400 300 200 Wheat, US, HRW 100 Maize 0 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Source of raw data: The Pinksheet, World Bank
500 Index (2000-01=100) 400 300 200 Urea Petroleum, spot Ave. crude price Thai, 5% 100 0 2000-01 2000-04 2000-07 2000-10 2001-01 2001-04 2001-07 2001-10 2002-01 2002-04 2002-07 2002-10 2003-01 2003-04 2003-07 2003-10 2004-01 2004-04 2004-07 2004-10 2005-01 2005-04 2005-07 2005-10 2006-01 2006-04 2006-07 2006-10 2007-01 2007-04 2007-07 2007-10 2008-01 2008-04 Month Source: Pinksheet, The World Bank, various issues
Supply - demand imbalance Price of other commodities Behavior of importers and exporters, traders, consumers, farmers -- speculation
Behavior of importers and exporters, traders, consumers, farmers IMPORTERS domestic price stabilization Ex: Philippines EXPORTERS restriction in exports Ex: India and Vietnam
Regular Milled Thai 5% Philippines Urea Paddy Farm Wholesale Retail Broken P/50kg P/kg P/kg P/kg US$/kg Jan-06 889 10.48 19.11 20.93 0.284 Mar-08 1,043 13.00 23.68 25.27 0.580 % increase 17% 24% 24% 21% 104% Source: BAS, IMF
Was the rise inevitable? What are the prospects for increasing productivity? What will be the response to higher prices? By the farmers, the private sector, the government, IRRI? Will the prices remain high and if so for how long?
Prophecy No. 3 Will rice prices remain high in the next 5 to 10 years? Most, if not ALL, forecasts say YES But the science of forecasting is not much better than fortune-telling -There may be several years of bumper crops - World Band forecasts have always been wrong -There may be new technology for energy production and rice production.only God knows Nipon Poapongsakorn 19 February 2008
In the short run, world rice prices will remain high due to speculation & food security concerns In the intermediate to long run, rice prices will be determined by -- technological advances in rice production & investments in infrastructure leading to an increase in rice productivity. technological advances in energy
IRRI s 9-point action plan for grain crisis Many reasons have been cited for the ongoing food grain crisis: -consumption overtaking production, -lower annual yield growth, -lack of land resources to raise acreage, -reduced public investment in agricultural research and development, -increase in population, adverse weather, pests, diseases etc.. Source : IRRI (International Rice Research Institute). 2008. Background Paper: The rice crisis: What needs to be done? Los Baños (Philippines,www.irri.org)
What are the solutions? According to International Rice Research Institute, Manila, in the near term, urgent actions from national governments and international agencies are needed on two fronts: -rapidly exploiting existing technological opportunities for increasing rice yields -and policy reforms to improve poor people s food entitlements. Rice production can be revitalized, but there are no silver bullets.
IRRI s 9-point action plan for grain crisis 1. Bring about an agronomic revolution in Asian rice production to reduce existing yield gaps 2. Accelerate the delivery of new postharvest technologies to reduce losses 3. Accelerate the introduction and adoption of higher yielding rice varieties 4. Strengthen and upgrade the rice breeding and research pipelines 5. Accelerate research on the world s thousands of rice varieties so scientists can tap the vast reservoir of untapped knowledge they contain
6. Develop a new generation of rice scientists and researchers for the public and private sectors 7. Increase public investment in agricultural infrastructure 8. Reform policy to improve the efficiency of marketing systems for both inputs and outputs 9. Strengthen food safety nets for the poor