Volatility in rice prices projected to continue

Politicians tinkering with rice policies in Asian governments amid shrinking stocks among exporters and rising demand could again drive global prices up, according to an economist at the International Rice Research Institute.

Samerandu Mohanty, head of IRRI’s social sciences division, said in a commentary on the global rice market that efforts among importing countries such as the Philippines to wean themselves away from foreign supplies would not stop the upward trend in the volume of grains traded worldwide.

“The overall upward trend of the volume of the global rice trade that was set in motion in the early 1990s continues to stay on track even after a change in sentiment of the importing countries during the post-2008 crisis to pursue self-sufficiency and reduce reliance on foreign rice,” Mohanty said.

“The current trade volume now accounts for nearly 9 percent of global production as compared with less than 7 percent during the 2008 rice crisis and 3.5 percent in 1990,” he said.

Mohanty, a principal scientist at IRRI, noted that major Asian importers such as Indonesia, the Philippines and Malaysia continue to import a combined three million to five million tons of milled rice, depending on their domestic output.

He added that record global output in the past several years has kept prices stable but, at the same time, stocks of the top five exporters —India, Thailand, Vietnam, Pakistan and the United States —have steadily declined.

He said strong growth in demand has pushed down the five countries’ combined inventories from 41 million tons in the crop year 2012-2013 to 28 million tons in 2016-2017.

Meanwhile, rice consumption has increased by nearly 14 percent from 418.5 million tons in 2006-2007 to 475.5 million tons in 2016-2017.

Mohanty said that as demand was expected to continue to rise in the coming years, the active participation of India and China in global rice trade—respectively as exporter and importer—“may bring a degree of uncertainty to the market because of their sheer size and their focus on domestic food security.”

“Politicians will continue to fiddle with domestic and trade policies to support farmers and achieve greater domestic price stability and in the process may bring greater volatility to the international market,” he said.

In the Philippines, the Duterte administration has sent signals that—now that the peak of the dry-season harvest is over—it would again allow importation to shore up domestic stocks as the lean production months start next month.