CCP:GR 99/4-RI 99/4  |
| CCP:GR 99/4-RI 99/4 |
COMMITTEE ON COMMODITY PROBLEMS |
JOINT MEETING OF THE
|
Rome, 22 - 24 September 1999 |
FOLLOW-UP TO THE GUIDELINES FOR NATIONAL AND INTERNATIONAL ACTION ON RICE IN 1996-1999 |
II. PRODUCTION POLICIES (Guidelines B(i) - B(iv))
III. TRADE POLICIES (GUIDELINES C(i) to C(viii))
IV. INTERNATIONAL FOOD AID POLICIES
V. CONSUMPTION (GUIDELINES A (ii) to A(viii))
1. Since 1972, the Intergovernmental Group (IGG) on Rice has reviewed at each of its sessions the policy measures adopted by governments which had direct implications for their rice sectors, and has evaluated these within the context of the Guidelines for National and International Action on Rice1. This paper examines the principal changes in countries' rice policies since the last session of the IGG in 1996. The information has been drawn from various sources, including replies from 52 Governments to the Secretariat's questionnaire.
2. The world rice economy went through a period of turbulence between 1997 and 1999, largely caused by El Niño and La Niña weather anomalies that disrupted the normal pattern of production in numerous countries, especially in Asia and Latin America and the Caribbean. In several instances, these circumstances were aggravated by the financial crisis which gripped the economies of various important rice producing and consuming countries. The period also coincided with the first phase of implementation of the Uruguay Round Agreement on Agriculture (URA).
3. Global rice production reached record levels in 1996/97 and 1997/98 but receded in 1998/99, when several producers experienced a sharp decline in output. Those shortfalls induced a substantial draw-down in stocks while world trade reached a new high in 1998. Notwithstanding relatively large availabilities in exporting countries, the rise in import demand caused a tightening in supplies underpinning world prices. The situation of the international rice market changed in the first half of the 1999 season, when the recovery in production in Asia and Latin America and the Caribbean brought about a drop in import demand and a slide in international rice prices.
4. Countries have responded differently to the changes in the international market environment, with some of them reacting to the production shortfalls by raising support to producers. At the same time, the need to meet commitments under structural adjustment programmes and the URA together with resource constraints have limited recourse by most to higher incentives to the domestic rice sector.
5. Among the developing exporting countries in Asia, India increased substantially rice support prices which, however, in real terms remained below the relatively high 1993 to 1995 levels. Moreover, in early 1999, the Government raised the price of subsidized urea by 11 percent in an endeavour to lessen the associated budgetary costs. In Pakistan, real support prices were lifted, but direct public intervention continued to be limited as the Government is progressively withdrawing from marketing and price support while stepping up the provision of subsidized credit to small farmers and fostering hybrid rice cultivation. Official procurement prices improved markedly in real terms in Myanmar, in contrast with the tendency prevailing in the first half of the 1990s. In late 1997, the Government introduced the "advance paddy purchase system" under which farmers sell, prior to harvest, a fixed quantity of paddy per hectare to the procurement agency at official prices. Thailand continues to operate a paddy mortgage scheme to sustain producer prices, as well as fertilizer and seed distribution programmes. In 1996 and 1997, it let real rice support prices fall, but in 1998 these rose substantially. In early 1999, reacting to a fall in producer prices, the Government earmarked Baht 3.5 billion (US$ 95.6 million) to finance rice purchases and storage costs. Similar measures were taken in 1999 in Viet Nam, where exporters were urged to anticipate paddy purchases, with the Government covering the associated storage costs.
6. Among the importing developing countries in Asia, rice support prices in Bangladesh were maintained in real terms during the last three seasons but trade in basic inputs, in particular fertilizers, was liberalized. Following the heavy floods in 1998/99, a rehabilitation programme was launched that included the distribution of basic inputs and subsidized credits. Although the Government continues to be committed to a rice area reduction programme, there has been little land diversion out of rice in the last ten years. Instead, the cropping patterns have shifted towards irrigated Boro rice, mostly at the expense of the predominantly rainfed Aus crop. Support producer prices have remained stable in real terms in Malaysia, where a free fertilizer distribution programme to paddy producers continues to be in operation despite its high associated budgetary costs. Moreover, the country is reportedly considering raising its 2010 rice self-sufficiency target from 65 percent to 72 percent. In the Philippines, the level of support prices was unchanged from 1996 to 1999, but in May 1999 a 25 percent rise was announced. Since 1996, the country has implemented the "Golden Harvest" programme, which aims at boosting rice and maize production by providing technical support and credit to the private sector. The Government also issued interim guidelines on Land Use Conversion to foster rice cultivation on irrigated and other prime land and prevent the diversion of areas under rice to other uses. Similarly, Indonesia has been carrying out a rice development programme in Kalimantan since 1996 in an attempt to offset the loss of rice land to non-agricultural uses in Java. Following the drought-reduced production in 1997/98, the country raised support prices substantially, in contrast with the preceding years when they were barely maintained in line with inflation. Such increases, however, partly compensated for a rise in fertilizer prices following a cut in government subsidies in early 1997. In Sri Lanka, paddy support prices were raised in 1999 for the first time since 1994. However, with the dismantling of the Paddy Marketing Board in 1996, Government procurement has been only sporadic and quantities purchased small. In the Republic of Korea, support prices were lifted in 1996, after being left unchanged for three years, and again in 1998, but prices in real terms remained below the pre---URA level. In fact, the ability of the Government to provide price incentives to rice producers is constrained since 1995 by its URA obligation to reduce the Aggregate Measure of Support to Agriculture, of which some 93 percent is accounted for by rice. Consequently, as the country continues to be committed to rice self-sufficiency, it has shifted to "green box" policies, in particular by supporting the development of high-yielding hybrid varieties.
7. Following three successive bumper harvests between 1995/96 and 1997/98, China has taken particularly forceful measures to counter the fall in rice producer prices with the introduction, in 1995, of the "Governors' Grain Bag Responsibility System", and, in June 1998, of the "Four Separation and One Consumption" reform2. The 1995 reform vested China's provincial governments with the responsibility for raising self-sufficiency in cereals in their provinces, for meeting Central Government's targets for stocks, and for trading with the other provinces. It opened a process of decentralization that limited the role of the central authorities largely to subsidizing the losses incurred by the grain bureaus, to managing national stocks and to carrying out foreign trade transactions. The subsequent 1998 reform introduced new guidelines for grain procurement and made the provinces liable for the losses incurred by the local grain bureaus. In addition, it re-instituted a State procurement monopoly on cereals, including rice, with private traders allowed to purchase grains from the Government-owned agencies only. Under the new pricing directives, the state grain bureaus are obliged to accept all the rice offered by farmers in their respective provinces (the only territory where they can operate), paying the fixed procurement price on a portion (quota) of the crop and, for above-quota deliveries, the highest of either the negotiated (market) price or the supportive (minimum) price. In addition, prices are to be differentiated according to the variety and quality offered. The State grain agencies were also instructed to resell the grains at a profit.
8. In Africa, several countries made inroads in lessening direct state intervention in the rice sector, mostly within the context of structural adjustment programmes. At the same time, concerns over the increased dependence on imports encouraged some to re-design rice production-enhancing measures. Egypt continued to limit rice area in light of irrigation water constraints, while sustaining increases in yields through intensive research and extension. The sector operates without input or credit subsidies since 1994. Likewise, in Nigeria, the fertilizer subsidies to the rice sector were withdrawn in 1997 and support is now largely limited to the distribution of improved seeds. In Senegal, rice domestic trade was liberalized following the withdrawal of the regional state agency, the SAED, from procurement and basic input distribution in 1995. Such a move, along with an opening of the market to imports, induced a substantial rise in production costs and keener competition from abroad which contributed to a marked contraction in output in 1994-1996. However, the provision of subsidized credit by the Government has helped reverse the decline since 1997. With the liberalization of the rice sector initiated in 1994, official producer prices in Côte d'Ivoire have little impact on farm-gate prices. Government assistance is now mainly restricted to the rehabilitation of rice fields and irrigation infrastructure. Similarly, the rice sector in Madagascar has been largely de-regulated and support concentrates mostly on infrastructure development and extension. By contrast, Ghana is attempting to reverse a falling trend in production through the distribution of high yielding varieties and the provision of credit to producers. Guinea is also paying particular attention to sustaining output, especially through public investment in rural infrastructure and irrigation, credit and extension. Mozambique launched a programme in 1998 to foster the development of rice production by promoting the use of fertilizers and quality seeds. Rehabilitation of irrigation facilities and improved access to credits have also helped sustain an expansion in output since 1995.
9. In Latin America and the Caribbean, there was also a general tendency to move towards more liberalized domestic market systems. In the Dominican Republic, minimum support prices were replaced with indicative prices in 1996, and subsidized credits to the agricultural sector were withdrawn in 1997. In Cuba, the Government has traditionally focused on the development of rice production in large state farms. Recently, attention is being also directed to the small production units where rice is mainly grown for household consumption. Costa Rica continued to operate support prices to producers. Although these were raised every year since 1995, the increases were insufficient to provide real incentives to farmers. Nonetheless production has trended upwards in recent years, sustained by an expansion in irrigation. Under the 1995-2000 "Alianza para el Campo" programme (Procampo), rice producers in Mexico have had access to various schemes in support of mechanization, fertilizer use and irrigation. In addition, a "one to one kilo swap" incentive was provided to exchange traditional with improved rice seeds. Under Procampo, rice producers have also been eligible for a per hectare cash payment every semester since 1994/95 (table 1). Further support has been provided through marketing subsidies, which were raised in 1998 to Mexican Pesos 150 per tonne, twice the level applied from 1994 to 1997.
| Table 1 : Mexico's Procampo Rice Area Payments, per Semester | |||||
| 1995 | 1996 | 1997 | 1998 | 1999 | |
| Pesos/hectare | 440 | 484 | 556 | 626 | 708 |
| US$/hectare | 68.5 | 63.7 | 70.2 | 68.5 | 72.0 * |
* Converted using January-April exchange rate
10. In 1997, Peru launched a programme to exempt fertilizers and other basic inputs from taxes, including import duties. Small farmers were also able to buy quality seeds under preferential credit conditions. Support to rice producers in Brazil continues to be granted mainly in the form of subsidized credit with minimum support prices used as a basis for the estimation of the product-hedged loans. The annual interest rate on such loans was reduced from 12 percent in 1996/97 to 9.5 percent in 1997/98 and the credit limit raised to sustain a recovery in production from El Niño. Ecuador also adopted special measures to overcome El Niño effects on production in 1997, including the distribution of certified rice seeds to small farmers and the allocation of US$ 200 million for the reconstruction of basic infrastructure. Most efforts in Guyana and Suriname are concentrated on the consolidation of rice production units and on the rehabilitation of basic infrastructure as the governments have withdrawn from direct intervention in production and marketing. In Colombia price support to small farmers by IDEMA, the official marketing agency, has diminished since 1997 with the winding up of that organization. However, in 1998 the Government subsidized the storage of domestically produced rice by millers to encourage early rice procurement from farmers.
11. Among the developed countries, drastic changes in rice production policies have been implemented since 1996. Under the provisions of the 1996 Federal Agriculture Improvement and Reform (FAIR) Act3, the United States eliminated the Acreage Reduction Programme, the target support paddy price and deficiency payments4 and provided for seven years of decoupled annual payments under "production flexibility contracts" (PFC) 5. However, the FAIR Act maintained two key instruments to assist producers when prices are low, i.e. the marketing assistance loan, under which loan deficiency payments6 (LDP) are made, and the non-recourse commodity loan7. As a result of that reform, rice farmers received PFC decoupled payments of close to US$ 450 million in both 1996 and 1997 and US$ 478 million in 1998. On a per tonne basis, the income support provided by the PFC has averaged some US$ 60 per tonne since 1996. As market prices were well in excess of the loan rate (fixed at US$ 143 per tonne, in paddy equivalent, for the whole 1996-2002 period), there was little scope for farmers to resort to loan deficiency payments and to non-recourse rice loans, a situation that might change in the course of the current marketing year, with the fall in rice market prices (table II of Supplement).
12. In 1995, Japan launched the Law for Stabilization of Supply, Demand and Price of Staple Food, which introduced some relaxation of government control over domestic rice marketing through an increase in the number of registered rice retailers and wholesalers. To keep production under control, the Government continues to set targets for land diversion from rice to alternative crops. In 1998/99 and 1999/2000, it was fixed at 960 000 hectares, the largest reduction proposed since the implementation of the programme (table 2). In addition, producer support prices, which had been kept unchanged since 1991, were reduced in 1997 and 1998, when rice stocks were reaching record highs. Japan is currently also encouraging the consolidation of paddy fields to enhance the sector's competitiveness.
|
Table 2: Japan, Rice Area Diversion Programme (000 hectares) | |||||||||
|
1990/91 |
1991/92 |
1992/93 |
1993/94 |
1994/95 |
1995/96 |
1996/97 |
1997/98 |
1998/99 |
1999/00 |
|
830 |
827 |
698 |
673 |
579 |
680 |
787 |
787 |
960 |
960 |
13. The European Community (EC) implemented the new Community Rice Market Organization in 1996/97, the main features of which were a change in the price regime, with the elimination of the threshold and target price; a shortening of the intervention period from seven to four months (April to July); the establishment of base areas for income payment; and a tightening of quality conditions for intervention. In line with the cereal reform, the EC intervention price for rice was lowered by 15 percent to ECU 316 per tonne between 1995/96 and 1998/99 (table III of Supplement). EC Producers were compensated for the reduction through direct payments, established on an hectare base, with maximum guaranteed surface area specified for each country to ensure that plantings did not exceed a ceiling level. In accordance with those principles, overshooting of the area limit resulted in a reduction in the compensatory aid in Spain in 1998 from ECU 222.89 to ECU 176.25 per hectare. As EC market prices were well below the intervention level, especially for Indica rice, in the course of the 1996/97 and 1997/98 seasons 162 000 tonnes and 350 000 tonnes respectively had to be accepted for intervention.
14. Trade in rice reached a record level in 1998, following a small decline in the preceding year. During the 1996-1999 period, most countries made progress in adjusting to the URA disciplines on market access and export subsidies8, progress that was facilitated by the high international prices prevailing over the period. Among the largest exporters, assistance to rice exporters has been dwindling since 1995, as generally high world prices have limited the need for export subsidies. For instance, among the developed exporting countries, the United States has not reported any rice sales under the Export Enhancement Programme since 1996. Exporters, however, continued to benefit from Commodity Credit Corporation (CCC) credit programmes, but quantities covered by these fell from 321 000 tonnes in 1995 to 215 000 tonnes in 1996 and to less than 90 000 tonnes thereafter. In the EC, 88 600 tonnes (milled equivalent) were exported with subsidies in 1995/96 valued at ECU 30.3 million, well below the URA limits of 163 000 tonnes and ECU 54.6 million. However, the unused portion of authorized subsidized exports was rolled over in 1996/97, when 226 500 tonnes were shipped with a subsidy outlay of ECU 72.2 million, compared with the URA limits of 157 100 tonnes and ECU 51.1 million. Exports of rice made with the use of refunds represented 94 percent of overall shipments to third countries.
15. Among the developing country exporters, Thailand did not give direct export support in recent years and the Government mostly confined itself to providing cheap credits to exporters for rice packing. India set up in 1997 a Basmati Rice Export Promotion Fund, financed through a levy on Basmati rice exports of Rupees 20 per tonne, which was doubled in 1999. Exports in Viet Nam are regulated by the Government through the issuance of export quotas to licensed traders and the setting of minimum export prices. Between April and August 1998, when drought conditions threatened to reduce output, an export tax was imposed to limit the outflow of supplies and ensure adequate supplies domestically. Myanmar has reportedly been allowing some private firms to participate in export activities but exclusively of Government-procured rice.
16. Under the provision for Special Treatment on Market Access9 of the URA, the Philippines expanded the Minimum Market Access (MMA), from 59 000 tonnes in 1996 to 69 000 tonnes in 1998. Purchases under the MMA were carried out by private licensed traders in 1999, subject to a 50 percent duty. Under the same provision, Thailand committed to establish minimum import quotas for rice of the order of 243 000 tonnes, but there has been little interest by traders to fulfill them. By contrast, the Republic of Korea, through its state trading entreprise, has meet its MMA provisions (table 3). Rice purchases in Indonesia continue to be carried out by Bulog10, the state marketing agency, but private traders were reportedly allowed to import rice as of 1999. In December 1997, Jordan revoked the monopoly held by the Ministry of Supply on imports of essential foodstuffs, including rice, and authorised the private sector to engage in medium grain rice import while reducing the tariffs from 5 to 1 percent. In 1998, faced with supply shortages, Bangladesh temporarily abolished all taxes on rice imports, including a 2.5 percent development surcharge. Likewise, Sri Lanka waived the 35 percent duty on rice imports in both 1996 and 1997, but re-imposed it in 1998 as supply conditions improved.
| Table 3: Republic of Korea, URA Rice Minimum Market Access Commitments (000 tonnes) | ||||
| 1995 | 1996 | 1997 | 1998 | 2004 |
| 51 | 64 | 77 | 90 | 205 |
17. In Africa, the tariff on cereal imports has been eliminated in Benin, but an additional tax continues to be levied. Guinea launched in 1996 a programme to tighten control over imports to prevent under-pricing. In 1996, Senegal dissolved the Caisse de Péréquation, a state trading agency, and let private traders engage in rice imports subject to a 0-30 percent variable levy in addition to a fixed 16 percent duty. In 1998, this was lowered to 10 percent but a surcharge of 20 percent was applied on imports of less than 55 percent broken rice. Similarly, imports have been liberalized in the Côte d'Ivoire since January 1997, subject to a customs duty and a fiscal tax. In mid-1997, the tariffs on paddy and husked rice were lowered to ensure adequate supplies to millers. In 1996, Nigeria reduced rice import duties from 100 percent to 50 percent, subject to a 35 percent rebate. The latter was lowered to 25 percent in 1997 and eliminated in 1999.
18. In Latin America and the Caribbean, member countries of the Caricom Agreement lowered the Common External Tariff on rice from 25 percent to 20 percent in 1998, with Jamaica applying an even lower 15 percent rate. Nicaragua eliminated in 1997 the price band system that had been in place since 1992 and replaced it with import duties of 30 percent. These were reduced to 25 percent in 1999, with a further drop to 10 percent scheduled in 2001. Guatemala opened several import quotas and, for the purpose of allocating them among private traders, set up a rice commission in 1996 composed of private and government representatives. Costa Rica raised import duties from 20 percent to 35 percent on volumes exceeding the minimum access quota in 1999. At the same time, however, it authorized the import of some 60 000 tonnes at a reduced 10 percent duty, well in excess of its MMA commitments. Chile's rice imports are subject to a general duty rate which is scheduled to fall by one percent every year, from 11 percent in 1998 to 6 percent in 2003. In 1997, Brazil raised the tariffs on imports from non-Mercosur countries, as an exception to the Common External Tariff. However, in June 1998, in the aftermath of El Niño, the country reduced the tariff rate for milled rice from 21 percent to 15 percent. Since 1995, Ecuador's imports are subject to a fixed ad valorem duty of 20 percent and 15 percent for milled and paddy rice respectively. In addition, under the "Andean Price Band System", it applies a variable duty which depends on the difference between a reference price and the CIF import price. In 1998, the country also resorted to a "tariff safeguard". As a result, the tariff equivalent rose to 26 percent and 20 percent for milled and paddy rice in 1998, respectively.
19. With the implementation of the URA, the EC replaced variable import levies with fixed duties, subject to maximum duty paid import prices for husked and milled rice11. As a result of the new import system, actual duties on rice from all origins have been falling steadily since 1996 (table IV of Supplement). Preferential access to the EC market (table 4) was enlarged following the accession of Austria, Finland, Sweden in 1995 so as to compensate traditional suppliers to those markets.
| Table 4: EC Preferential Access for Rice Imports | |||
| Origin | Regulation | Volume (000 Tonnes) | Preferential Tariff * |
| ACP | 1706/98 1595/98 2603/97 | 125 (husked) 20 (100 percent broken) | -65 percent |
| OCT | 1036/97 2603/97 | 35 (husked) | 0 percent |
| Bangladesh | 862/91 | 4 (Basmati, husked) | -50 percent |
| Egypt | 196/97 | 32 (all rice) | -25 percent |
| GATT Art.XXIV.6 | 327/98 | 63 (milled rice) 20 (husked rice) 80 (broken rice) | 0 percent 88 EUR/tonne -28 EUR/tonne |
| India and Pakistan | 1503/96 | No limit, but subject to specific conditions | -250 EUR/tonne |
| All Countries | 2058/96 | 1 (100 percent broken rice) | 0 percent |
* In-quota preferential tariff or reduction over duties applied to out-of-quota imports
20. Following a surge in processed rice deliveries from Overseas Countries and Territories (OCT) which had unrestricted duty-free access to the EC, the Community resorted to two safeguards in January and May 1997 that put a combined 170 000 tonnes ceiling on preferential access imports from OCT and Africa, the Caribbean and the Pacific (ACP) countries. As a result, actual shipments from OCT countries were drastically reduced, with some of these being redirected through the ACP quota.
21. Under the Special Treatement Provisions on market access of the URA12, Japan deferred the tariffication of rice trade barriers and granted free of duty13 minimum market access equivalent to 4 percent of consumption in 1995/96, rising gradually to 8 percent in 2001/2002. However, in 1999/2000 the country opted for tariffication and imposed a uniform specific tariff of yen 351.17 per kilo (about US$ 3 000 per tonne) on imports exceeding the MMA. While the MMA was maintained at 606 000 tonnes, the new provisions slow the opening of the market14 in subsequent years and allow Japan to take recourse to the URA Special Safeguards Provisions, along the pattern applying to those countries that have tariffied.
22. Shipments of rice as food aid, which had peaked at 937 000 tonnes in 1995, fell back in 1996 and again 1997 (table V of Supplement), notwithstanding the production shortfalls and the financial crises faced by many countries over that period. The 1996 decline reflected a sharp fall in donations by Japan which was only partly offset by an increase from the EC and its members. The contraction in the 1997 reflected smaller contributions from all major donors. Rice food aid recovered strongly in 1998, surpassing 1 million tonnes for the first time since 1993, sustained by record shipments from Japan and a recovery in those by the United States, while those from the EC and other donors contracted. The main beneficiary in 1998 was Indonesia which alone received 40 percent of the total, followed by the Democratic Republic of Korea (14 percent). Notwithstanding the rise in 1998, food aid accounted for less than 4 percent of total trade, 1 percent lower than in 1995.
23. Triangular transactions of rice food aid channelled through the World Food Programme (WFP) followed a different pattern, rising by 49 percent in 1996 and again by 15 percent in 1997. In 1998, the quantities remained unchanged around 195 000 tonnes with Japan financing 37 percent, followed by Germany (14 percent) and Sweden (10 percent). Among the supplying countries, Thailand provided over 50 percent of the total, followed by Nepal and India (13 percent each).
24. In the course of 1997 and 1998, prices of rice rose substantially in a number of developing countries, especially in Asia and Central America and parts of Africa, causing hardship among the poor. While a number of governments reacted by stepping up the distribution of subsidized rice and by facilitating imports, high world prices often implied that considerable foreign exchange had to be spent to meet the import bills. In some cases, Governments continued to maintain control over consumer prices, for example in Samoa, Syria as well as in Malaysia where, in 1998, retail price controls were extended to local super grade rice. Several other countries continued to distribute rice at subsidized prices, for instance, the Islamic Republic of Iran and Bangladesh (table 5). In 1999, Egypt reacted to a price hike by announcing it would increase consumer access to low priced rice in state-owned outlets.
| Table 5: Bangladesh Rice Distribution System (PDFS) (000 tonnes) | |||
| Monetized | Non-Monetized | Total | |
| 1993/94 | 279 | 71 | 350 |
| 1994/95 | 263 | 66 | 329 |
| 1995/96 | 524 | 69 | 593 |
| 1996/97 | 121 | 618 | 739 |
| 1997/98 | 287 | 242 | 529 |
25. In other instances, Governments were under pressure to change rice distribution or price policies. For instance, Costa Rica allowed a 7 percent rise in the regulated rice consumer prices in July 1998 but at the same time authorised large imports at preferential rates. Following the freeing of market prices in 1997, Jordan lifted the restrictions on price marketing margins applied to rice and other basic foodstuffs, abolished the consumer rice coupon system in place since 1990 and replaced it with targeted cash payments. In early 1999, India announced a rise in the retail prices of rice, wheat and sugar supplied through the Public Distribution System in an attempt to contain the budgetary food subsidies. A 29 percent increase was to be applied to the price of rice for sale to all beneficiaries. Ultimately, however, the price rise was only enforced on sales to the "Above the Poverty Line" consumer group. Likewise, Myanmar scaled down by 200 000 tons the quantity of rice distributed at subsidized prices to government employees.
26. World rice stocks at the end of the marketing seasons in 1998 closed at their second lowest level in the 1990s. This resulted in a deterioration of the stocks to projected consumption ratio to less than 14 percent globally. At the country level, a few Governments took action to increase food security rice reserves. For instance, in 1997 the Philippines introduced the policy of securing three months of buffer stock by the end of June of every year. To maintain a two month consumption reserve, Costa Rica, allows imports at a reduced 1 percent rate to cover any shortfalls. At the regional level, the Asean Food Reserve was raised to 67 000 tonnes in 1997 and to 84 000 tonnes in 1998. By contrast, Ecuador is currently dismantling the two public institutions responsible for the marketing and storage of rice, thereby eliminating public sector involvement in rice-holding. China auctioned in May 1999, some of the old grain stored in the State's reserves. Under the 1998 cereal marketing reform, the Central Government has secured funds for the building of 25 million tonnes of grain storage facilities.
27. After falling sharply in 1995, contributions to the International Emergency Food Reserve (IEFR) recovered in 1996 and rose further in 1997 and 1998, when they reached 240 231 tonnes, valued at US$ 72.5 million. Contributions to the Protracted Relief and Recovery Operations (PRRO)15, operated by the World Food Programme, fell in 1997 but recovered to 61 706 tonnes in 1998.
28. The disappointing rice production performance in some major producing countries in 1997 and especially in 1998 encouraged Governments to raise support prices to producers. Yet, often the increase was not sufficient to compensate for inflation. In some instances, support prices also lost their effectiveness in influencing production because state marketing agencies played a diminishing role in procurement or were dismantled. There was also a widespread tendency to cut input subsidies to farmers, but the assistance granted in the form of extension services for improved production techniques and varieties, infrastructure development and subsidized credits was often stepped up with a positive impact on production. Several developed countries carried forward fundamental reforms in domestic rice policies, which entailed a shift from price to income support to producers.
29. While some countries opened their rice markets to imports well beyond their URA obligations, others limited themselves to satisfy those commitments. Recourse to export aids, which had diminished in 1995, rebounded in 1996 as some of the subsidy concessions unused in the previous year were rolled over. Globally, however, subsidized exports were well below the overall URA country limits. On the other hand, certain countries resorted to quantitative export limitations and to minimum export prices. While some Governments raised the level of controlled retail prices or liberalized them, many of them kept consumer prices from escalating by opening their markets to imports. However, because of high international prices of rice over the period and limited foreign exchange availability, supplies were not always sufficient to prevent consumption from falling.
30. Several of the aforementioned policy measures supported the objectives of the Guidelines, in particular:
31. However, despite these positive developments, a number of problems and issues persisted:
32. In view of the above, the Group might wish to:
1 Document CCP: GR99/4-RI99/4-Sup.1 contains the text of the basic text of the Guidelines as well as the core statistical tables to the document.
2 The 1998 cereal marketing reform calls for the separation of responsibilities of the central and local governments, the separation of the oil and grain reserves management from grain trading, the separation of administrative and commercial functions of the state grain companies, and the separation of old and new debts of those firms.
3 A more detailed description of the FAIR Act provisions for the cereal sector is contained in the FAO Cereal Policies Review, 1995-97, Commodities and Trade Division.
4 The deficiency payment rate was equal to the difference between the target price and the higher of the commodity loan rate or the national average price during a specified time.
5 The contract period began with the 1996 crop and is to end with the 2002 crop. To benefit from the Government farm programmes, farmers are free to plant on 85 percent of their land any mix of the following crops: wheat, feed grains, rice, oilseeds, mung beans, lentils, peas, cotton and other industrial crops. The annual contract payment is based on 85 percent of the contract area and farm yield in 1995.
6 When market prices fall below the loan rate, the farmer has the option of receiving a loan deficiency payment (LDP) rather than enrolling into the marketing assistance loan. The LDP rate is calculated as the difference between the loan rate and the price at the date of the application.
7 Farmers can obtain a non-recourse loan from the Commodity Credit Corporation (CCC) using the current year's crop as collateral. The value of the loan is calculated as the product of the announced loan rate and the quantity placed under the loan. To redeem the crop, farmers should repay the lower of either the established loan rate plus interest, or the prevailing market price.
8 According to the URA, the volume of rice for which export subsidies are allowed should not exceed 503 000 tons world-wide by the end of the implementation period, compared to 604 000 tonnes in the base 1986-90 period..
9 Under Article 4, para.2, and Annex 5, Section B on Special Treatment of the URA.
10 Bulog relinquished its import monopoly for wheat, soybeans and sugar in the last quarter of 1998.
11 The duty-paid import price for husked rice should not exceed 180 percent of the intervention price for Indica rice and 188 percent of the intervention price for the other rice types. For milled rice, the ceilings are 263 percent for Indica rice and 267 percent for the other rice types.
12 Under Article 4, para.2, and Annex 5, Section A, on Special Treatment of the URA.
13 The Government could however apply an import mark-up of 292 yen /kilo on the imported rice retail sale price.
14 For instance, while the MMA should have reached 758 000 tonnes in 2000 (or 8 percent of consumption), under the new system, it would amount to 682 000 tonnes.
15 Replaced the Protracted Refugee Operations (PRO) since June 1998.