The United Nations must manage a global food reserve.

• Author: Aragon, Corazon T.

More than half of the world's 6 billion people eat rice as their staple food. Global rice prices have been rising since early 2003. Moderate increases of 9 per cent in 2006 and 17 per cent in 2007 were recorded, but since the beginning of 2008 international rice prices have shown a steep upward trend, reflecting a limited supply available for purchase. (1) In March 2008, the high quality Thai 100 percent B (white rice) was quoted at $562 per tonne, which was 74 per cent higher than in March 2007, and rose to $898 per tonne by mid-May 2008. Likewise, Thai A1 Super, fully broken rice, markedly increased by 94 per cent, from S263 per tonne in March 2007 to $522 in March 2008 and surged to $764 per tonne two months later. By May 2008, world rice prices were more than double their May 2007 level.

Hardest hit by this spike in prices are major rice-importing countries, especially the Philippines, the world's top rice importer. The increase in prices worldwide also drove up domestic rice prices, which rose from March 2007 to March 2008 by 100 per cent in Bangladesh and Cambodia, 70 per cent in Afghanistan, 55 per cent in Sri Lanka and 40 per cent in the Philippines. (2) Only 6 to 7 per cent of global rice production is traded internationally each year. (1) Due to a very thin market, the price of rice has been subject to the sharpest fluctuations among the world's traded staples.

The rice crisis resulting from soaring prices and tight supplies has serious implications. Rice provides 60 per cent of the food intake in Southeast Asia and about 35 per cent in East and South Asia. The International Rice Research Institute reports that 700 million, or two thirds of the world's 1.1 billion poor, live in rice-growing countries in Asia. These people spend as much as 30 to 40 per cent of their income on rice alone. The poor are, therefore, vulnerable to the surge in rice prices since their purchasing power will be seriously hit, resulting in severe food deprivation and malnutrition. (2) In recent months, the rice crisis has resulted in social unrest, with mass protests and food riots in several countries. (3)

In this paper, we examine the underlying causes of the recent rice crisis and assess the effectiveness of the Association of Southeast Asian Nations (ASEAN) Emergency Rice Reserve, the East Asia Emergency Rice Reserve, and the South Asian Association for Regional Cooperation (SAARC) Food Security Reserve in addressing past and present world rice crises. In addition, we provide some recommendations for a global food reserve as an alternative to the existing regional rice reserves. We also suggest measures to improve rice productivity in rice-producing countries, strengthen market information in order to increase stocks, and better determine the production capacity and demand for each participating country and their consequent contribution to the global food reserve.

UNDERLYING CAUSES OF THE RICE CRISIS

The six-year global surge in international market prices of rice is largely due to declining global rice stocks, as world consumption has outpaced production. For the past 10 years the annual world rice consumption grew faster, at a 1ittle over 2 per cent, than the annual rice production rate at 1.07 per cent (Table 1). As a result, rice stocks have fallen by 12 per cent, from 119 million tonnes in 2003 to 104.5 million tonnes in 2007 (Table 2). Based on forecasts by the Food and Agriculture Organization of the United Nations (FAO), rice stocks in 2008 will further dwindle to 103.5 million tonnes, implying that global demand will further outpace production. Currently, China holds about half of the world's rice stocks.

Table 1. Annual Growth Rates in Rice Yield, Area, Production and Consumption: World, Asia, Africa and Major Rice-Producing Countries, 1997-2007 (in per cent) Yield Area Production Consumption Population World 0.82 0.22 1.07 2.05 1.14 Asia 0.74 0.21 0.96 1.01 Africa 1.96 1.27 3.25 3.92 China -0.10 -0.67 -0.71 -0.44 0.58 India 1.70 0.20 2.18 1.88 1.40 Indonesia 0.99 0.16 1.13 0.48 1.45 Bangladesh 3.55 0.86 4.42 4.22 2.09 Viet Nam 2.14 -0.03 2.14 2.89 1.04 Thailand 1.35 0.38 1.82 1.26 0.87 Myanmar -0.73 2.42 2.05 1.12 0.42 Philippines 3.48 2.00 5.12 2.54 1.84 Brazil 3.51 0.40 4.42 0.96 1.06 Japan 0.29 -1.50 - 1.14 -0.99 0.05 Source of basic data: United States Department of Agriculture (USDA), World Rice Statistics and World Factbook. (4) Table 2. World Rice Situation, 2005-08 (in million tonnes) Item 2005 2006 2007 2008 Forecast Rice Production 424.7 429.6 433.7 Rice Utilization 420.0 428.1 435.7 Rice Supply (1) 524.2 534.3 538.2 Rice Export (2) 29.2 31.0 28.7 Rice Stocks (3) 99.5 104.7 104.5 103.5 (1) Rice production plus opening stocks. (2) The mine rice exporters are India, Pakistan, Thailand, the United States and Viet Nam. (3) May not equal the difference between supply and utilization because of differences in individual country-marketing years. Source: FAO, April 2008. Crop Prospects and Food Situation, Rome. THE EFFECTS OF CLIMATE CHANGE

Many factors have caused the imbalance between the demand and supply of rice. On the supply side, a number of distinct weather and climate-related incidents have caused disruptions in rice production in some countries. The extended drought in Australia over the last four years caused the annual rice harvest to fall by as much as 98 per cent from pre-drought levels. Cyclone Nargis in Myanmar in May 2008 ruined large rice paddies with salt water; major flooding in Bangladesh in 2007, strong typhoons in the Philippines from 2006 to 2008, cold weather in Viet Nam, and widespread drought in India and China in 2002 also led to lower yields. Moreover, since 2005, the shortfall in world rice production has been aggravated by the reoccurrence of pests and diseases during the growing season. In China, Indonesia, the Republic of Korea, Japan and Viet Nam, abnormally high temperatures and excessive use of broad spectrum, residual insecticides, which disrupt natural pest defence mechanisms, also contributed to the decline in rice production. In Viet Nam alone, pests have wiped out as much as 200,000 tonnes of rice.

Another major reason for the continuing imbalance in the demand and supply of rice is the slow growth in rice yield, which was less than 1 per cent for the past 10 years in Asia and worldwide (Table 1). In China--the world's top rice-producing country--and Myanmar, rice yields have decreased over the past 10 years at an average of 0.10 and 0.73 per cent, respectively. In Japan, rice yields have Battened in the same period, as evident from its average annual growth in rice yield of only 0.29 per cent. Thailand--the world's top rice exporter--registered a lower annual growth rate of 1.38 per cent compared to that of the Philippines--the top rice importer--at 3.48 per cent annually. In 2007, Thailand's rice yield of 2.71 tonnes per hectare was also lower compared to the 3.86 tonnes per hectare of the Philippines. However, Thailand's total rice area of 10,430 hectares was 2.5 times larger than that of the Philippines at 4,250 hectares in the same year.

DECREASING INVESTMENT IN AGRICULTURE

Another key reason for limited rice yields is a decline agricultural infrastructure in many rice-producing countries. As reported by the International Rice Research Institute, international donors have not provided sufficient support for agricultural research and development. Without significant external assistance, this problem is made worse as lack of capital prevents many governments from supporting research and development and maintaining irrigation facilities. "This is shown by the lower average annual growth rate of 3.9 per cent in public investments in agriculture in Asia in the 1990s as compared to 4.3 per cent annually in the 1980s. In 2000, only 0.4 per cent of the agricultural gross domestic product was spent on research and development in Asian countries, compared to 0.53 per cent in developing countries as a whole and 2.36 per cent in developed countries. (5)

Moreover, the production of rice is more expensive now because of higher fertilizer, fuel and power costs. With the introduction of high-yielding rice varieties that require non-organic fertilizers and irrigation as essential inputs, world rice production has become more energy-intensive.

HIGH ENERGY PRICES

A 2008 Asian Development Bank study reveals that world energy prices have increased rapidly in the years 2002/07, with oil prices rising by about $10 per barrel annually in nominal terms. Despite large subsidies in Asian countries, domestic energy prices were high, at 20 to 50 per cent, while increases in fertilizer, irrigation and transportation costs ranged from 30 to 50 percent. A World...