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Effects
of Growing Rice Shortage on the World Market
Friday,
April 25, 2008
By Francis W. Nyepon
Rice
shortage on the Liberian market is very
likely, as rice-producing nations cut export
of the commodity due to spikes in global
demand and poor harvests. Global rice stocks
are at their lowest level since 1976, and
foreign sales restrictions by many producing
nations have removed about a third of the
rice traded in the international market out
of reach of poor and medium income
countries.
For
example, in Liberia where rice is now
available at a premium, consumers are likely
to see an even higher price over the next
few months for the 100lbs bag of parboiled
long-grain rice. However, due to the current
global economic movement on rice sales, and
soaring price to an all-time high, shortage
of rice on the Liberia market will soon
become evident to local rice dealers and
consumers.
Let
it be stated here and now that there is no
shortage of rice on the Liberian market at
this time. However, there is a genuine
concern of this author that scarcity in
global rice stock could lead to higher
import costs and higher prices. Hence, one
can only suggest that the Sirleaf
administration not allow itself to be caught
off-guard and later find itself scrambling
to take necessary action if the worst should
comes to past.
In
the past few months, major rice-producing
countries such as Thailand, India, Vietnam,
China, Cambodia, Indonesia, and Egypt, have
all limited export of rice to assure
adequate supplies at home as prices hit
record levels. Nearly half of the world's
6.6 billion people depend on rice to
survive, and it is a staple for more than
4.5 billion people in Africa, Latin America
and Asia. With rising population and
economic growth, the world is already eating
more of the grain than is now being
harvested. Data from the US Department of
Agriculture shows that world rice
inventories now stand at about 72 million
tons, enough to cover only about 17 per cent
of global annual consumption in 2008, when
just eight years ago, stockpiles were equal
to 35 per cent of demand.
According
to Reuters and National Public Radio, the
price of Thai rice, a global benchmark, shot
up 30 per cent from US$580 to US$760 a ton
in the month of April alone. That was more
than double its price of US$360 a ton in
January, just few months ago. Thailand is
the world's largest rice exporter, and
according to TIME, this sudden spike in the
Thai rice prompted Vietnam and India, the
world's second- and third-largest exporters
to follow suit; hence, the impending crisis.
Experts
at the Ministry of Commerce in Monrovia
predicts with certainty that should this
global trend persists, the average Liberian
would be unable to pay for the anticipated
price hike in rice of US$50 to US$80 in
market rate for a 100lbs bag of rice. With
the specter of a shortage looming, coupled
with statements made by senior
administration officials including some
well-positioned lawmakers, this author sees
all indicators pointing to a rice shortage
on the Liberian market.
In
addition, discussions with experts from the
UN's Food and Agricultural Organization (FAO),
and an agricultural policy officer at the
Ministry of Agriculture in Monrovia,
confirms that the global commodity price
hike could serve as a wakeup call to Liberia
to prioritize a rice policy based on
self-sufficiency. Notwithstanding, this
author should caution that if a strategy is
not crafted carefully, market conditions
could severely hit ordinary Liberians very
hard especially those transitioning from
forced displacement and migration, after 14
years of civil war and chronic economic
dislocation. The primary concern here is
that poor families will suffer most as they
spend more than 70 percent of their income
on food, according to a recent World Food
Program (WFP) report. Unable to afford
high-priced rice, many poor transitioning
families would expect and rely on government
to subsidize rice or international food aid,
which could become a bedrock for social
discontent.
Economists and
political scientists at the University of
Liberia contend that this is a crisis that
has been brewing for some time. Although
there has been substantial progress on the
political and democratic fronts, the lack of
substantial capital investment in the
agricultural sector, which has stagnated or
even declined in real terms could cause
additional challenges in other sectors.
Unless there is concerted investment in the
agricultural sector, rice price hikes will
become a perennial problem, and real food
shortage could cause growing anger among the
poor desperate for food. To ensure that the
pending economic shock doesn't escalate into
a crisis on the Liberian market, a national
rice strategy needs to be promulgated now.
Liberia does not yet have a food problem,
but there is an underpinning of an agrarian
crisis looming, which could pose a problem
and could further stretch our fragile
democracy, and challenge our weak social
cohesion.
Liberian
consumers need to be made aware of the
potential shortage of rice on the world
market, and the looming skyrocketing prices
that is currently causing a stir around the
world. It is only fair to publicly discuss
the crisis before officially warning of
drastic actions that might be needed to curb
potential disaster. Liberians need to know
that food prices all over the world are
going through the roof due to global oil
prices among other economic factors, and it
doesn't matter where one lives, people
around the world are paying higher prices
for food, which is causing lots of problem
for lots of governments. Liberians need to
know that countries like South Korea is
releasing more rice from state reserves to
boost supplies, a source at that country's
embassy near Washington, D.C informed this
author. Also, an information offer at the
Chinese Embassy near Monrovia also stated
that his country has already announced that
it will pay farmers more for rice and wheat,
in an attempt to raise output and cool
surging inflation.
In
a Liberian context, what implications
would a global rice shortage have on the
economy and society? What should the
government do to ensure that ample supply
of rice is on the Liberian market? Can
rice be further subsidized in Liberia as
some countries are currently doing to
avoid social anger? Will the government
target subsidies to rice growers as an
incentive as is customarily done in
America, Europe and Asia for specific
commodity farmers?
Serious
consideration should be given to finding
fundamental alternatives to counter
anticipated market forces and the expected
surge in global rice prices caused by high
demand and poor harvests. In the opinion
of this author, the Liberian government
should move quickly and take immediate
action before anxiety sets in amongst the
population, so that the Liberian people
will not become restless and use the high
price of rice to stir up unnecessary
social discontent. Policymakers both in
the administrative and legislative
branches of government need to take
immediate action, because if current spike
in global rice prices continues, and
available global stock keeps declining
sharply as they are, market disruption in
Liberia seems set to escalate. If ever a
time was right to encourage Liberians to
grow more rice, that time is now. Better
yet, what better time than now to
encourage Liberians to eat more cassava
(yucca), yam, eddo, plantain, and fufu?
While
Liberia is one of the largest
consumer-nations of rice per capita in the
world, its fret over food security should
be brought to the forefront, and
policymakers need to understand that many
of the rice-producing countries mentioned
above, sole aim presently is to tame
inflation in their respective countries by
keeping more of their supplies at home in
order to drive down domestic prices.
Likewise, in a bid to stabilize prices
here at home, the Liberian government
needs to fundamentally restructure the
consumer pricing index on consumer goods,
such as petroleum and building materials
because the wholesale inflation price is
close to a 19-month high, posing a major
policy challenge at a time when economic
growth in the country has slowed across
the board, but most significantly in the
employment sector.
Current
domestic market trend would suggest that
the following steps be considered with
some urgency. First, that the government
issue an immediate national rice emergency
decree and completely break the monopoly
on rice importation. Second, special
incentives should be considered to
encourage new investors into the sector.
Third, a determination should be made to
actively become a player on the world
grain market. This means, the government
should plan a major purchase of rice in
the international market to boost supplies
on the Liberian market in order to keep
prices down. This would suggest that the
Sirleaf administration move to purchase at
least 300,000 metric tons of rice to cover
the anticipated import and production
shortfalls. The challenge would be how to
make this process transparent, accountable
and corruption free? Would officials see
this as national emergency or an
opportunity for personally financial gain?
Rice,
is the staple of our national diet.
Instead of improving local production,
successive governments have usually
focused on importation because it is
cheaper to buy rice outside of the country
rather than subsidizes our farmers to grow
the prefer long-grain rice Liberians
desire. A quarter century of bad
governance and monopolistic business
policies, including mismanagement and war
have handcuffed our national interest to
the misguided pleasures and special
interests of a few self-centered,
unpatriotic and narrow-minded individuals.
Notwithstanding, over the past two years,
our country has undergone profound
changes. A move in the right direction to
fundamentally root social transformation.
Our
country, known over two decades for civil
and political strife is slowly but surely
recovering under a democratically elected
government. With the current leadership
rooted in social transformation, the lack
of self-sufficiency in rice production
isn't a burden Liberians have to accept,
but rather a challenge that we must all
overcome.
The
Sirleaf administration must now prioritize
a pro-growth national rice policy, must
completely open the market and break the
monopolistic business practices on rice
and other basic commodities like concrete,
petroleum etc. In addition, weak
non-performing state-owned enterprises
needs to be auction off to the highest
bidder. The Ministry of Agriculture should
be given the leverage and then take the
lead in refining aged-old policies that
have long disadvantaged farmers and rural
people.
About The Author :
Francis Nyepon is managing partner of DUCOR
Waste Management in Liberia. He is a policy
analyst and vice chair of the Center for
Security and Development Studies, and serves
on several boards of humanitarian,
environmental and human rights organizations
in the United States and Liberia. He can be
reached at francis.nyepon@Gmail.com
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