Bumper rice crop to bring down prices
The 2008 rice bumper harvest is coming to a close with better-than-expected production that could help ease prices, but there is expected to be an overall decline in global cereal production, according to the UN’s Food and Agriculture Organisation (FAO). The agency has warned that the global economic slowdown could outweigh the gains for the poorest of the world’s rice consumers, because of falling incomes and rising job insecurity.
The FAO currently predicts global paddy production in the 2008 season to rise to 683 million tonnes, 3.5 per cent more than in 2007 and the fastest rate of growth for three years. The increase will be due to a 2.2 per cent increase in the amount of land cultivated globally as farmers and governments reacted to the high prices.
Rapid increases in the price of rice – the staple food for around two and a half billion people – and other cereals played a major role in the food price shocks last year, characterised by high fuel and fertilizer prices that triggered political unrest in many countries.
Down but still high
Global rice prices for 2008 ended the year on average 80 per cent higher than in 2007 despite the steady decline since their peak levels in May, FAO reported. The price of a tonne of the benchmark Thai white 100 per cent second grade was $611 in January compared to $385 in the same month in 2008 having risen to a peak of $963.
“One positive effect of the high rice prices in 2008 was that farmers and governments took up the challenges and opportunities and planted more, boosting production despite high fuel and fertilizer costs and a scarcity of quality seed,” said FAO Senior Economist Concepcion Calpe.
Favourable weather in many parts of the world also helped to sustain yields in the face of high fuel and fertilizer prices.
Slowdown to hit consumers
Soaring rice prices last year led governments round the world to take a variety of measures to try and dampen the effects on the poor.
“If last year they (governments) had to intervene on two conflicting fronts, both to stimulate rice production and to keep rice affordable to consumers, they may face even greater challenges in 2009 in the context of the severe global economic slowdown,” FAO said in its report. “In this context, governments may again have to intervene, this time to sustain rice producer prices while also protecting the purchasing power of their populations, at a moment when demands for public help from other sectors are quickly intensifying.”
Much of the global production gain for the 2008 paddy season is expected to be concentrated in Asia, with bumper harvests expected in both large and small producing countries.
African countries are also forecasting exceptional results and rice production is expected to rise by an impressive 18 per cent due to government support and increased use of new, high-yielding and resilient seed varieties. As a result, rice imports to Africa are now expected to decline to their lowest level since 2004.
The excellent 2008 paddy crop is expected to lead to a strong rebuilding of world rice reserves this year to 118 million tonnes, in milled rice equivalent, the highest level since 2002 and nine million tonnes more than in 2008.
Although lower prices are good for consumers and manufacturers, export prices below US$400 per tonne for top quality white rice could adversely affect farmers and hamper polices geared towards self-sufficiency in many importing countries, FAO said.
Earlier this month, the FAO advised that overall cereal production – which includes rice, wheat and maize – would decline but stocks would be up due to falling demand.
They also reported further increases in the use of cereals for biofuels production – a total of 104 million tonnes for 2008/09, up 22 per cent from the 2007/08 estimated level, representing 4.6 per cent of world cereal production.
The price of both wheat and maize have fallen from highs reached early last year, with both commodities retreating toward mid-2007 levels.
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