The End of Cheap Rice: Good News or Catastrophe?

August 21, 2013

     By Duncan Green     

Are high food prices here to stay, and if so are they a Good Thing (producers benefit) or a Bad Thing (consumers go hungry)? These are the questions explored by a thought-provoking and very even-handed new paper (only 5 pages) from the ODI on the ‘end of cheap rice’.

From the Summary:

“After more than 30 years of decline as a result of the Green Revolution, rice prices have more than doubled since 2000, rising by almost 120% in realrice prices terms. (see unhelpful graph – can we just have line graphs in future please?)

Restocking among major producers and shifts in trade policy have played their part in recent price increases, but are only part of the story. The more fundamental drivers of increased prices are the higher costs of fertiliser, diesel, and labour as rural wages rise in parts of Asia.

Rising rural wages are good news, with potentially far-reaching benefits for poverty reduction in Asia, given that an estimated 1.3 billion of Asia’s poor and vulnerable people depended on rural labouring for their livelihoods in 2008.

But more costly rice is a problem for poor and vulnerable groups that do not share in the benefits of economic growth, both in Asia and in Africa, where coastal cities have become accustomed to cheap rice imports.

The threat posed by higher rice prices calls for social protection policies to guard against price shocks. [Probably no accident that China and India are introducing them at breakneck pace]

In the longer run, however, the rise in rice prices presents an opportunity for African farmers.”

[and on this final point, from the main paper]

women-rice-farmers“More changes in rice production in parts of Asia may well be coming, as environmental imperatives come into play, including conserving water, avoiding felling forests or converting wetlands, reducing emissions from flooded fields of paddy and controlling the use of agricultural chemicals. This may well mean that some rice-producing areas have to switch to less intensive methods with lower production. To keep up world rice supplies, more rice will, therefore, be needed from other areas. This would present opportunities not only in Latin America, but also in Africa where the first goal would be to replace Asian imports by domestic production, then to export rice from those parts of Africa that have high potential for rice production, such as parts of humid coastal West Africa.

These potential changes to rice cultivation increase the value of having a range of technical options to allow farmers to adjust to changing opportunities and environmental limits. Some technical options may reap private profits and we can expect to see the major agricultural corporations invest in the necessary research. Most of these technical advances, however, will be public goods and will therefore require an active public research effort. This means that various key bodies need adequate investment, including the International Rice Research Institute (IRRI), the Africa Rice Center and the national agricultural research systems of current and potential rice producers. Compared to the potential gains, the costs of research have proved low. Policy-makers now need to have the courage to invest sufficiently in this vital research.”

August 21, 2013
Duncan Green