Rice: Present and future

Abdul Bayes, Professor of Economics Jahangirnagar University, The Daily Star, Asia News Network, Dhaka

Rice remains the most important staple food crop in developing countries and also in humid tropics across the globe. Asia's reliance on rice dates back to centuries. About 90 percent of the world's rice production and consumption tend to take place in the continent of Asia. Surprisingly, so much rice is being produced on small and marginal farms and in countries confronted with extreme population pressure and acute shortage of land resources. Not long ago, the production of this perennial crop purported pitifully low yield and failed to feed the hungry millions.

Famines and starvation used to be adduced to poor production of rice. It was not until the release of IR8 -- the first miracle rice under the aegis of Green Revolution -- that rice production marched fast ahead of population growth. During the last 33 years or so -- from 1968 to 2001 -- rice production rose by 2.3 percent per year and four-fifths of the increase in production came from the increase in yield.

While we eat rice regularly, we seem to know very little about its demand and supply situations in a global context. The price of ignorance could be heavy in the face of politics being dominated by the rice prices in many countries of the world, including Bangladesh. Let me draw on a recent paper, Global Rice Market: Trends and Perspective by Mahabub Hossain and Joesephine Narciso of the International Rice Research Institute.

In Asia the average farm size is reported to be less than half a hectare in China, Java and the Red River Delta in Vietnam. It is a less than one hectare in Bangladesh, eastern India and the Mekong River Delta in Vietnam and one to two hectares in other countries of Asia. But in Thailand, Myanmar, Cambodia and northern India, the average farm size is above two hectares possibly, pointing to their comparative advantage in rice production.

A typical Asian farmer plants rice mainly to feed own family and there is very little concern and striving on their part to generate marketable surplus. Thus, in the face of natural hazards wide variation in the thin surplus causes prices to swing swiftly and significantly. Both domestic and international rice markets thus fall prey to instability.

Another factor also works behind autarkic rice production. Rice has long been considered as "super" sensitive and strategically important item by every government who counts on courting in self-sufficiency in rice production and maintaining stable rice prices for consumers.

The reason: It is the single most important element in the dietary basket of the poor and an important source of income for farmers -- generally observed to be politically powerful.( In some developed countries, politicians are just pawns in the hands of the farmers but in developing countries the reverse seems to hold true). The saying goes: When rice price is right, power is right and when rice price is wrong, power is gone. Hence every government attempts to intervene in the market during sharp swings in prices.

The instruments of such interventions vary across countries in response to the gravity of the situation. However, the instruments include subsidies and taxes on inputs and outputs, control on international trade and participation in marketing through procurement and distribution of grains.

There is also economic imperatives in attaining rice self sufficiency: Lack of foreign exchange to import huge quantity when needed, risks in procurement when price is highly volatile during deficit and surplus period. Thus, government, consumers and producers -- all tend to lose from participating in the international market, if left to be led by global markets.

It is not, however, true that only poor countries aim at self sufficiency in rice production. Middle and high income Asian countries -- with no financial constraint to manage funds for financing imports and even with low cost sources at door steps -- promise to protect respective rice farmers.

They think that if rice cultivation is abandoned for whatever reasons, the farming infrastructure e.g. irrigation and drainage facilities would vanish away and would not be possible to recoup if a reversing to rice is called for.

South Korea and Japan hold up interesting arguments for their support to rice farmers: (a) Agriculture is a multifunctional occupation and rice farming, besides supplying food and fodder, goes to provide many other external benefits to the society. (b) At high income levels, urban consumers complain less about high prices to support relatively low income farmers because rice bill constitutes a small proportion of their total food bill and much smaller to total income.

(c) The support to farmers through price mechanism sounds socially more acceptable (and possibly prestigious) than through direct transfers or remittances to poor relatives engaged in farming in rural areas (no beggar thy neighbor policy!).

There is also a management issue.

Unlike in developed countries where farmers form a tiny proportion of population and hence direct transfers by the government to farmers is not a difficult proposition, farmers constitute a large proportion in developing countries making direct transfers disdainfully difficult task. The price mechanism can easily connect consumers and producers through the control in the market.

Subsistence farming, self-sufficiency paradigm and subsidy in some countries -- all contributed to the thinness of international rice market. Only 6 percent of world's rice production is currently traded internationally compared to wheat (18 percent) and coarse grain (about 12 percent).

It would be interesting to see how the market behaves in the future. All would, of course, depend on consumption and production pattern in the fast changing world. After all, rice is a luxury item at a very low level of income when meeting energy requirement remains a grave concern.

As income goes up households substitute low cost sources of energy such as coarse grains, cassava and sweet potato for rice (called substitution effect). And then up the income scale, rice becomes an inferior goods -- people prefer high cost quality food with more protein, vitamins such as vegetables, bread, fish and meat.