The rising price of rice

I received my latest copy of IDEA’s Economic Trends, a regular digest produced by the Institute for Development and Econometric Analysis, Inc. (IDEA) whose Chairman, Dr. Cayetano W. Paderanga Jr., is my former President/CEO.  The said publication thoroughly researched on the rising price of rice. I am sharing this, for us to be informed of the trend and real score.

According to IDEA, “the recent increases in rice prices in the international market has sent an alarming signal. The sudden surge has prompted economies worldwide to examine possible and available policy interventions to limit its       far-reaching implications. Deliberations need to be quick and intelligent, as the price of rice has already manifested a rapid increase in the first quarter of 2008. From an average of US$385/ton in January, it jumped to a historic high of US$824.5/ton in April. This dramatic increase, for one, has already forced food-supplying countries to limit their exports to the rest of the world. While such restrictions are aimed at protecting their domestic consumers, it may also cause shortages and social unrests in rice-importing economies. As the global cereal crisis unfolds, the Philippines, as a net importer of rice, has enough reasons to have sleepless nights”.

Furthermore the said research reported that “rice remains to be a precious commodity around the world. Currently, rice is grown in about 153 million hectares rice fields, 90 percent of which can be found in Asia. In fact, the top producers of rice in the world are in this region, including Thailand, Vietnam, India, Pakistan, and China. In North America, the US captures some 63 percent of the total arable land that is utilized for rice farming. In the Philippines, palay accounts for about 16 percent of the total gross value added in Agriculture. It is a major source of livelihood in the rural areas. Households with low incomes spend a considerable proportion of their income for buying rice. Since 2000, the country has been one of the world’s top rice-importing nations, along with Indonesia, Iran, and Nigeria. In 2007, their combined rice imports accounted for a quarter of the world total rice imports. More than the basic statistics about rice, concerns also arise on the decreasing trend of the stock-to-use ratio (i.e., the proportion of rice stocks to total utilization)”

This ratio was stable at 32 percent from 1980 to 2000, but in 2006, it fell by almost half to only around 17%. One major reason for the decrease is the fact that stocks are being utilized whenever there is an imbalance between demand and production. In such cases, stocks helps in moderating the price of rice, but the rapid depletion of stock—in part brought about an increasing worldwide population—also increases the risk of higher prices, according to the same report.

Incidentally, IDEA is a non-stock, non-partisan institution dedicated to high quality economic research, instruction and communication. IDEA is committed to pursue independent inquiry into the the workings of the economy, to propagate the techniques for doing this and to communicate the results of analytical studies to the public.

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