CHANGING STRUCTURE, CONDUCT AND PERFORMANCE OF THE WORLD RICE MARKET

David Dawe, International Rice Research Institute (IRRI), Philippines Tom Slayton, Slayton & Associates, USA

ABSTRACT

Lower world rice prices: absolute and relative

The most important change in the world rice market during the past fifty years has been a dramatic 77 percent decline in the level of prices adjusted for inflation (Figure 1). This is a remarkable achievement in the realm of food security, as it allows countries improved access to affordable supplies of food. The main factor behind the decline in prices was the Green Revolution, which led to an increase in yield, a lowering of unit production costs, and an expansion in harvested area due to multiple cropping. Other than the new technology of modern varieties and irrigation, falling real prices for fertilizer also were important.

During the past 20-25 years, nearly all Asian currencies have depreciated in real terms against the dollar. Nevertheless, this real depreciation has not been large enough to cancel the decline in world prices in US$terms. Figure 2 shows that the percentage decline in world rice prices has been at least 50 percent in nearly all Asian countries in real domestic currency terms.

Although world prices for other major grains, i.e. wheat and maize, have also declined in real terms, the decline for rice has been larger. Thus, from 1965 to 1982, rice prices were on average 3.13 times as high as world maize prices, and 2.54 times as high as world wheat prices. In the past three years, 2001 to 2003, the ratios fell to 1.93 and 1.35, respectively. As such, the attractiveness of rice imports has improved relative to the other grains.

Increased stability of world prices

Not only are world rice prices much lower than in years past, they are also much more stable. The average absolute value of annual price changes was 24 percent between 1965 and 1981, but just 11 percent between 1985 and 1998. One factor that has contributed to increased price stability has been increased stability of per capita production due largely to irrigation and the pest and disease resistance of modern varieties. While new irrigation projects are more expensive than in the past, the percentage of rice area that is irrigated increased from the late 1970s to the mid 1990s.

Another contributing factor to the increased price stability is the pronounced deepening of the world market. In terms of tonnage traded, average world trade increased from an average of 13.5 million tonnes (milled rice) between 1984 and 1993 to an average of 23.9 million tonnes between 1994 and 2003, a near doubling of the market. The deepening of the world rice market has been broad-based in terms of countries and regions. On the export side, Vietnam has played a key role in adding depth to the market. Other large increases have come from India and Thailand. On the import side, much of Asia rediscovered the law of comparative advantage as yield growth slowed to nearly zero in countries like Indonesia and the Philippines and forced additional imports.

A third contributing factor to the increased stability is the renewed commercial orientation of several major exporters, Thailand being a case in point. In 1998, a major El Niño event in Indonesia and a substantial depreciation of the Thai baht due to the Asian financial crisis caused domestic rice prices to surge 50 percent in Thailand in the span of just two months. During the world food crisis of the 1970s, the response of Thailand to increased domestic prices was an export ban, creating fears of rice shortfalls around Asia. But in 1998, Thailand continued to supply the world market and exported a then record of 6.5 million tonnes. China and India, with large stocks in the hands of their governments, also played key roles as market stabilizers in 1998, especially in the low-grade markets.

New importers and reduced dominance of Asia

In the years before OPEC and before the Green Revolution began to spread widely, Asia (excluding the Middle East) accounted for 64 percent of world rice imports. Today, however, that share is just 32 percent. The primary reason for Asia’s relative decline in imports was a strong increase in demand from the Middle East and Africa. The Middle East, with its economies enriched by greater oil revenues and attracting an influx of foreign workers, boosted its share of world rice imports from 5 percent to 18 percent. Africa increased its share of world imports from 9 percent to 22 percent. In general, both population growth and an increased share of rice in total calories have driven the increased imports in African countries. In the Middle East, however, the increased imports have mainly been driven by increased population growth, with the share of rice in caloric intake being little different today than before OPEC.

New actors and policies: is the role of government changing?

The dominance of governments in the international rice trade is much less today than in the late 1970s. As the role of government in the international rice trade has diminished, so has the influence of large trading companies. Today, there are a larger number of smaller trading companies, which has increased competition and eroded trading margins. The role of the private sector in the international rice trade has expanded during the past 25 years in Thailand, Vietnam, Bangladesh, and Indonesia. Similar trends have occurred in much of Africa and Latin America. However, many governments still retain substantial control over the trade, the main examples being China, India, the Philippines, Japan, Korea, and Taiwan.

Trends in quality

With rising income levels and increased market liberalization, there has been a pronounced shift from low quality (>20 percent brokens) to high quality (£20 percent brokens) during the past 25 to 30 years. In the mid 1970s, low quality comprised 38 percent of the world trade, but that percentage declined to just 25 percent in 1998-99. In addition, the price differential for higher quality has narrowed substantially. For example, in 1990, Thai 100B commanded a premium of US$176 per ton (constant 2003 dollars) relative to A1Special (Figure 3). During the past three years, however, this differential has averaged about US$50 per ton. Because of the narrower differential, many consumers have traded up and are reluctant to accept low quality rice as a substitute for higher quality.

Paddy exports today account for about 5 percent of total world trade (milled equivalent basis), consisting primarily of exports from the United States to Latin American countries. Although it is more costly to ship paddy because of the expense of transporting the lower-valued hulls and the extra space required, this trade is driven by a structure of import tariffs in Latin America designed to encourage local milling and, to a lesser extent, possibly by higher milling costs in the US.

Changements de structure, de direction et des performances du marché mondial du riz

David Dawe, Institut international de recherche sur le riz (IIRR) (Philippines) Tom Slayton, Slayton & Associates (ÉTATS UNIES)

RÉSUMÉ

Fléchissement - absolu et relatif - des cours internationaux du riz

Depuis cinquante ans, la chute spectaculaire de 77 pour cent du niveau des prix corrigés de l’inflation est le changement le plus important observé sur le marché mondial du riz (Figure 1). Cette performance est remarquable sur le plan de la sécurité alimentaire car elle permet aux pays d’accéder plus facilement à des produits alimentaires à des prix abordables. La baisse des prix est essentiellement due à la révolution verte qui a entraîné une hausse des rendements, une diminution du coût des unités de production et une augmentation des surfaces récoltées grâce à des cultures multiples. Outre la nouvelle technologie de variétés modernes et l’irrigation, la diminution des prix réels des engrais a également joué un rôle important.

Au cours des 20-25 dernières années, presque toutes les monnaies asiatiques ont été dépréciées en termes réels par rapport au dollar. Cette dépréciation réelle n’a pas toutefois été assez importante pour annuler la réduction des prix mondiaux en dollars. La figure 2 montre que le fléchissement des prix du riz sur les marchés internationaux a atteint au moins 50 pour cent dans presque tous les pays d’Asie en terme de monnaie nationale réelle.

Bien que les cours internationaux de toutes les autres céréales principales (blé et maïs) se soient également affaiblis en termes réels, le déclin a été plus important pour le riz. Ainsi, de 1965 à 1982, les prix du riz ont été, en moyenne, 3,13 fois supérieurs à ceux du maïs et 2,54 fois supérieurs à ceux du blé sur le marché international. Au cours des trois dernières années, soit de 2001 à 2003, ces chiffres sont tombés respectivement à 1,93 et 1,35. Il est donc devenu plus intéressant d’importer du riz plutôt que d’autres céréales.

Plus grande stabilité des prix mondiaux

Les prix internationaux du riz ne sont pas seulement plus faibles que dans les années précédentes; ils sont aussi beaucoup plus stables. La valeur moyenne absolue du changement des prix annuels était de 24 pour cent entre 1965 et 1981, mais d’à peine 11 percent entre 1985 et 1998. La plus grande stabilité de la production par habitant, résultant essentiellement de l’irrigation et de la résistance des variétés modernes aux ravageurs et aux maladies, est l’un des facteurs qui a contribué à renforcer la stabilité des prix. Alors que les nouveaux projets d’irrigation sont aujourd’hui plus onéreux que dans le passé, le pourcentage des surfaces rizicoles irriguées a augmenté depuis la fin des années 70 jusqu’au milieu des années 90.

La consolidation sensible du marché mondial a également joué un rôle dans le renforcement de la stabilité des prix. En termes de tonnes échangées, le commerce mondial a augmenté en moyenne de 13,5 millions de tonnes (riz usiné) entre 1984 et 1993 à quelque 23,9 millions de tonnes entre 1994 et 2003. La taille du marché a donc pratiquement doublé. De nombreux pays et régions ont participé à la consolidation du marché mondial du riz. Sur le plan des exportations, le Viet Nam a joué un rôle capital mais l’Inde et la Thaïlande ont également apporté une contribution non négligeable. Au niveau des importations, une grande partie de l’Asie a redécouvert la loi de l’avantage comparatif, la hausse des rendements ayant ralenti jusqu’à une valeur proche de zéro dans des pays comme l’Indonésie et les Philippines qui ont dû augmenter les importations.

Un troisième facteur qui a contribué à l’augmentation de la stabilité des prix est la nouvelle orientation commerciale de plusieurs grands exportateurs. À cet égard, la Thaïlande est un très bon exemple. En 1998, le phénomène important El Niño en Indonésie et la dépréciation sensible du baht thaï provoquée par la crise financière de l’Asie se sont traduits par une brusque montée des prix intérieurs du riz de 50 pour cent en à peine deux mois. Durant la crise alimentaire mondiale des années 70, la Thaïlande a répondu à la hausse des prix nationaux en interdisant les exportations, ce qui a éveillé la crainte de pénuries de riz en Asie. Mais en 1998, la Thaïlande a continué d’approvisionner les marchés internationaux avec un volume record d’exportations de 6,5 millions de tonnes. La Chine et l’Inde, dont les gouvernements détenaient d’importants stocks, ont également joué un rôle de premier plan dans la stabilisation des marchés en 1998, notamment pour les marchés de qualité inférieure.

Nouveaux importateurs et affaiblissement de la position dominante de l’asie

Dans les années précédant l’OPEP et le début de la large diffusion de la Révolution verte, la part de l’Asie (à l’exclusion du Moyen-Orient) dans les importations mondiales de riz s’élevait à 64 pour cent. Aujourd’hui, cette part représente à peine 32 pour cent. Le fléchissement relatif des importations de l’Asie est essentiellement imputable à la forte poussée de la demande enregistrée au Moyen-Orient et en Afrique. Le Moyen-Orient, qui s’est enrichi grâce à la croissance des recettes pétrolières et qui a attiré un afflux de travailleurs étrangers, a augmenté sa part des importations mondiales de riz de 5 à 18 pour cent. Le volume des importations mondiales en Afrique est, quant à elle, passée de 9 à 22 pour cent. L’élévation des importations dans les pays africains s’explique en général à la fois par la croissance démographique et par l’augmentation de la part du riz dans les rations caloriques totales. Au Moyen-Orient, toutefois, l’expansion des importations est essentiellement due à l’essor démographique, la part du riz dans les apports caloriques étant aujourd’hui peu différente de ce qu’elle était avant l’existence de l’OPEP.

Nouveaux acteurs et nouvelles politiques: les gouvernements changeraient-ils de rôle?

À l’heure actuelle, les gouvernements dominent beaucoup moins le commerce international du riz qu’à la fin des années 70. Parallèlement à l’affaiblissement du rôle des gouvernements sur le marché international du riz, les grandes sociétés commerciales ont perdu de leur influence. Les petites sociétés sont aujourd’hui beaucoup plus nombreuses; la concurrence est donc plus vive et les marges commerciales ont été réduites. Depuis les 25 dernières années, le secteur privé joue un rôle plus important sur les marchés internationaux du riz en Thaïlande, au Viet Nam, au Bangladesh et en Indonésie. On observe des tendances similaires dans de nombreux pays d’Afrique et d’Amérique latine. De nombreux gouvernements exercent néanmoins encore un contrôle rigoureux sur les échanges, ce qui est le cas notamment de la Chine, de l’Inde, des Philippines, du Japon, de la Corée et de Taiwan.

Une évolution vers la qualité

Compte tenu de la hausse du niveau des revenus et d’une plus grande la libéralisation du marché, le riz de qualité supérieure (£20 percent de brisures) a nettement pris le pas sur celui de qualité inférieure (>20 percent de brisures) depuis 25-30 ans. Au milieu des années 70, le riz de qualité inférieure représentait 38 pour cent des échanges mondiaux, mais à peine 25 pour cent en 1998-99. L’écart de prix pour les qualités supérieures a aussi nettement diminué. Ainsi, en 1990, le riz thaï 100B exigeait une majoration de prix de 176 dollars E.U. la tonne (en dollars constants 2003) par rapport au A1Spécial (Figure 3). Depuis trois ans, cet écart est de l’ordre de 50 dollars E.U. la tonne seulement. Du fait de la réduction de l’écart de prix, de nombreux consommateurs ont changé de mode de consommation et ne sont plus disposés à accepter du riz de qualité inférieure.

Les exportations de riz paddy représentent aujourd’hui environ 5 pour cent du total des échanges mondiaux (en équivalent riz usiné) et concernent surtout les livraisons des États-Unis aux pays d’Amérique latine. Bien que le paddy soit plus onéreux à expédier en raison des frais de transport des balles de riz d’une valeur inférieure et du plus grand espace requis, ce commerce est justifié par la structure des tarifs d’importation en Amérique latine qui vise à encourager l’usinage local et, dans une moindre mesure, par des coûts de mouture qui peuvent être plus élevés aux États-Unis.

Evolución de la estructura, el comportamiento y el rendimiento del mercado mundial del arroz

David Dawe, Instituto Internacional de Investigación sobre el Arroz (IRRI), las Filipinas, Tom Slayton, Slayton & Associates, EE.UU.

RESUMEN

Precios mundiales del arroz más bajos: absolutos y relativos

El cambio más importante que se ha dado en el mercado mundial del arroz en los últimos 50 años ha sido una espectacular disminución del 77 por ciento en el nivel de los precios ajustados a la inflación (figura 1). Se trata de una conquista extraordinaria en el ámbito de la seguridad alimentaria, ya que permite a los países tener mayor acceso a reservas de alimentos asequibles. El factor principal de la disminución de los precios fue la revolución verde, en virtud de la cual las cosechas aumentaron, los costos de produción por unidad disminuyeron y se extendió la superficie cultivada debido a la producción de cultivos múltiples. Aparte de la nueva tecnología de variedades modernas y riego, la caída de los precios reales de los fertilizantes también fue un factor importante.

En los últimos 20 o 25 años casi todas las monedas asiáticas se han devaluado en cifras reales respecto al dólar. Con todo, esta devaluación real no ha sido lo suficientemente grande para cancelar la disminución de los precios mundiales en dólares. La figura 2 muestra que la disminución de los precios mundiales del arroz ha sido por lo menos del 50 por ciento en todos los países asiáticos, en cifras reales en moneda local.

Si bien los precios mundiales de otros cereales importantes, es decir el maíz y el trigo, también han disminuido en cifras reales, la disminución del arroz ha sido mayor. De esta manera, de 1965 a 1982 los precios del arroz fueron en promedio 3,13 veces más elevados que los precios mundiales del maíz, y 2,54 veces más elevados que los precios mundiales del trigo. En los últimos tres años, de 2001 a 2003, estas proporciones disminuyeron a 1,93 y 1,35 respectivamente. En estas condiciones, el las importaciones de arroz revisten más atractivo que las de otros cereales.

Estabilidad cada vez mayor de los precios mundiales

No sólo son mucho más bajos los precios mundiales del arroz que en años anteriores, sino también son mucho más estables. El valor promedio absoluto de los cambios anuales de los precios fue del 24 por ciento entre 1965 y 1981, pero sólo del 11 por ciento entre 1985 y 1998. Un factor que ha contribuido a la mayor estabilidad de los precios ha sido el aumento de la estabilidad de la producción per cápita, debido en gran parte a la irrigación y a la resistencia contra las plagas y las enfermedades que tienen las variedades modernas. Si bien son más costosos los nuevos proyectos de irrigación que en el pasado, el porcentaje de la superficie de arrozales con riego aumentó de fines del decenio de 1970 a mediados de los años noventa.

Otro factor que contribuye a incrementar la estabilidad de los precios es la pronunciada profundización del mercado mundial. Desde el punto de vista del tonelaje que se comercia, el crecimiento promedio del comercio mundial oscila entre una media de 13,5 millones de toneadas (arroz elaborado) entre 1984 y 1993, y una media de 23,9 millones de toneladas entre 1994 y 2003, lo que representa casi una duplicación del mercado. La profundización del mercado mundial del arroz ha tenido una amplia base en cuanto a las regiones y los países participantes. De la parte exportadora, Viet Nam ha contribuido en forma decisiva a darle profundidad al mercado. Otros incrementos considerables son de la India y Tailandia. De la parte importadora, gran parte de Asia redescubrió la ley de la ventaja comparativa al desacelerarse el crecimiento de las cosechas casi hasta cero en países como Indonesia y las Filipinas, lo que obligó a hacer importaciones adicionales.

El tercer factor que contribuye a la estabilidad es la renovada orientación comercial de varios de los principales exportadores, como Tailandia. En 1998, un intenso fenómeno de El Niño en Indonesia y la considerable devaluación del baht tailandés debido a la crisis financiera de Asia, hicieron subir un 50 por ciento los precios internos del arroz en Tailandia en sólo dos meses. Durante la crisis mundial de alimentos del decenio de 1970, la respuesta de Tailandia al incremento de los precios internos fue la prohibición de exportar, que hizo temer una posible escasez de arroz en toda Asia. Pero en 1998 Tailandia siguió abasteciendo el mercado mundial y exportó 6,5 millones de toneladas, que entonces eran un volumen sin procedentes. China y la India, cuyos gobiernos tenían grandes reservas, también participaron considerablemente en la estabilización de mercado en 1998, sobre todo en los mercados de calidad inferior.

Nuevos importadores y menor predominio de Asia

En los años anteriores a la OPEP y antes de que comenzara a propagarse aceleradamente la revolución verde, Asia (con exclusión del Medio Oriente) concentraba el 64 por ciento de las importaciones mundiales de arroz. Sin embargo, hoy en día esa proporción es sólo del 32 por ciento. La principal razón de la disminución relativa de las importaciones de Asia fue un fuerte incremento de la demanda del Medio Oriente y África. En el Medio Oriente las economías prosperaban gracias a que obtenían ingresos más elevados del petróleo, además de que recibían más trabajadores extranjeros, de manera que su participación en las importaciones mundiales de arroz se disparó del 5 por ciento al 18 por ciento. En África la proporción de las importaciones mundiales de arroz pasó del 9 por ciento al 22 por ciento. En general, el aumento de las importaciones en los países africanos obedece tanto al crecimiento demográfico como a una mayor participación del arroz en el total del consumo de calorías. Sin embargo, en el Medio Oriente el aumento de las importaciones obedeció sobre todo al crecimiento demográfico, aunque la participación del arroz en el consumo de calorías ha variado poco desde antes de la OPEP.

Nuevos participantes y políticas: ¿está cambiando la función del gobierno?

Los gobiernos actualmente participan mucho menos en el comercio internacional del arroz que a fines de los años setenta. Con la disminución de la intervención del gobierno en el comercio internacional del arroz, también ha disminuido la influencia de las grandes empresas comercializadoras. Hoy existen numerosas pequeñas empresas comercializadoras, lo que ha incrementado la competencia y reducido los márgenes de ganancia. La función del sector privado en el comercio internacional del arroz ha aumentado en los últimos 25 años en Tailandia, Viet Nam, Bangladesh e Indonesia. Se han verificado tendencias parecidas en gran parte de África y América Latina. Sin embargo, muchos gobiernos siguen controlando considerablemente el comercio, los principales ejemplos son China, la India, las Filipinas, el Japón, Corea y Taiwán.

Tendencias de la calidad

Con la subida de los niveles de los ingresos y la mayor liberalización del mercado se ha verificado un profundo cambio del consumo de arroz de baja calidad (>20por ciento grano quebrado) al de alta calidad (£20por ciento grano quebrado) en los últimos 25 a 30 años. A mediados de los años setenta, el arroz de baja calidad representaba el 38 por ciento del comercio mundial, pero ese porcentaje disminuyó a sólo el 25 por ciento en 1998-1999. Además, la diferencial del precio de la calidad superior ha disminuido considerablemente. Por ejemplo, en 1990 el arroz tailandés 100B obtenía un sobreprecio de 176 dólares por tonelada (a dólares constantes de 2003) respecto al tipo A1especial (gráfico 3). Pero en los tres últimos años este diferencial ha sido de 50 dólares en promedio por tonelada. Debido a que este diferencial es menor, muchos consumidores ahora consumen arroz de mejor calidad y se niegan a aceptar arroz de baja calidad en lugar del de calidad más alta.

Las exportaciones de arroz con cáscara representan hoy cerca del 5 por ciento del total del comercio mundial (con base en el equivalente elaborado), y consisten principalmente de exportaciones de los Estados Unidos a los países latinoamericanos. Aunque cuesta más expedir el arroz con cáscara por el gasto que representa transportar las cáscaras, cuyo valor es menor, y por el espacio adicional que se requiere, este comercio obedece a la estructura de los aranceles a las importaciones que rigen en América Latina, cuyo objetivo es alentar la industria local y, en menor medida, tal vez por los costos más elevados de elaboración en los Estados Unidos.

Changing structure, conduct and performance of the world rice market

David Dawe, International Rice Research Institute (IRRI), Philippines Tom Slayton, Slayton & Associates, U.S.A.

Lower world rice prices: absolute and relative

Surely the most important change in the world rice market during the past fifty years has been the dramatic decline in the level of prices adjusted for inflation (real prices). In 1950, the average world market price for top quality indica (e.g. Thai 100Bs, FOB Bangkok) was US$137 per ton in nominal terms. Today, in early 2004, the nominal price is about US$220 per ton, an increase of 61 percent. Yet, during those 53 years, the average price level, as measured by the United States (US) CPI, has increased by 666 percent! The net result is that, after adjusting for inflation, world rice prices today are 77 percent lower than the average from 1950-1981 (see Figure 1)^[13]. This is a remarkable achievement in the realm of food security, as it allows countries improved access to affordable supplies of food. Because the poorest Asians are landless rural dwellers who must purchase their daily rice, low food prices are important for poverty alleviation in Asia. Other important groups of poor people who benefit from the relatively cheap prices are small farmers who have insufficient land to produce a surplus for sale, farmers who grow crops other than rice (e.g. maize), and the urban poor.

Green revolution and cheaper fertilizer. The main factor behind the decline in prices is, of course, the Green Revolution, which led to an increase in yield and a lowering of unit production costs. It also led to an expansion in harvested area due to multiple cropping, further increasing production. During the past half century, production in Asia increased from 125 kg paddy per capita in 1950 to 173 kg paddy per capita at its peak in 1999. Other than the new technology of modern varieties and irrigation, falling real prices for fertilizer also were important. At the dawn of the Green Revolution in 1967, world market urea prices were about US$400 per ton in current dollar terms, while during the past five years, they have averaged slightly less than US$100 per ton.

In local currencies. A decline in world market rice prices in terms of real US$does not necessarily translate into a decline in real domestic currency terms for individual countries. To the extent that the domestic currency undergoes a real depreciation against the US$, this will erode the decline in the world rice price when translated into the domestic currency. During the past 20-25 years, nearly all Asian currencies (with the exception of the Japanese yen) have depreciated in real terms against the dollar. Nevertheless, this real depreciation has not been large enough to cancel the decline in world prices in $terms in any Asian nation. Figure 2 shows the percentage decline in world rice prices in real domestic currency terms for a number of Asian countries. The decline has been at least 50 percent in nearly all countries, with Indonesia the main exception, where it has only declined by 10 percent. In other words, the Indonesian rupiah has depreciated so strongly during the past 20-25 years that the world market price of rice, measured in terms of constant Indonesian rupiah, has declined only slightly.

Compared to other grains. Although world prices for other major grains, i.e. wheat and maize, have also declined in real terms, the decline for rice has been larger. Thus, from 1965 to 1982, rice prices were on average 3.13 times as high as world maize prices, and 2.54 times as high as world wheat prices. From 1983 to 2000, these ratios declined to 2.45 and 1.87, respectively. And in the past three years, 2001 to 2003, the ratios fell even further, to 1.93 and 1.35. As such, the attractiveness of rice imports has improved relative to the other grains.

Increased stability of world prices

Not only are world rice prices much lower than in years past, they are also much more stable. Dawe (2002) calculated that the average absolute value of annual price changes was 24 percent between 1965 and 1981, but just 11 percent between 1985 and 1998. A more sophisticated calculation using the root mean square error of a regression of the real price on a time trend divided by the average price gave similar results.

Increased production stability. One factor that has contributed to increased price stability has been increased stability of per capita production. In the decades of the 50s, 60s, and 70s, fluctuations in per capita production of >±3 percent were relatively common, occurring 22 times in the 29 years from 1952 to 1980. Since then, fluctuations of this magnitude have occurred just six times in 22 years. The average absolute value of annual changes in per capita production was 4.4 percent from 1952 to 1964, 3.7 percent from 1965 to 1981, and only 1.6 percent from 1985 to 1998 (Dawe, 2002).

Increased production stability is due largely to irrigation and the pest and disease resistance of modern varieties. While irrigation is more expensive than in the past, the share of rice area irrigated increased from the late 1970s to the mid 1990s. This is primarily because large areas of upland (3 million ha) and deep-water rice (1.2 million ha) either went out of rice production or were converted to irrigated area between the late 1970s and the early to mid-1990s, constituting a 25 percent decline in the rice area under these ecosystems (Huke and Huke, 1997). In addition, irrigated rice area increased during these years at an average annual rate of about 0.9 percent per year, or about 600 000 hectares annually. Thus, while irrigated area comprised about 51 percent of total rice area in the late 1970s, it accounted for 55 percent of total rice area in the early to mid-1990s. Excluding China, where large areas of irrigated rice were lost during this period of time, the relative increase in irrigated area was more significant, rising from just 35 percent of total area in the late 1970s to 44 percent in the early to mid-1990s.

A deeper world market. Another contributing factor to the increased price stability is the pronounced deepening of the world market. Between 1961 and 1993, world rice trade fluctuated between 3 and 5 percent of world production, with an average of 4.3 percent (based on raw data from FAOSTAT). In the ten years since 1994, however, the ratio has exceeded 5 percent every single year, with the share traded averaging 6.3 percent. In terms of tonnage traded, average world trade increased from an average of 13.5 million tonnes (milled rice) between 1984 to 1993 to an average of 23.9 million tonnes between 1994 and 2003, a near doubling of the market.

The deepening of the world rice market has been broad-based in terms of countries and regions, although Asia (excluding the Middle East) increased its share of both exports and imports in recent years. On the export side, Vietnam has played a key role in adding depth to the market. Other large increases have come from India, Thailand, China, and Pakistan. On the import side, much of Asia "rediscovered the law of comparative advantage (Slayton, 1999)" as yield growth slowed to nearly zero in countries like Indonesia and the Philippines and forced additional imports in order to contain pressure on domestic prices in the face of increased demand driven by population growth. In the case of Japan, increased imports were driven by WTO commitments. (Despite this recent increase in its’ share of world rice imports, Asia remains much less dominant than it was in the 1960s, as described in the next section). Imports by Africa, the Middle East, and Latin America and the Caribbean also increased between the two periods.

The role of market stabilizers. A third contributing factor to the increased stability is the commercial orientation of several major exporters. During the 1950s, prices were relatively stable despite large instability in production. Dawe (2002) argues that this was due to the commercial orientation (defined as a large share of exports in domestic production) of several major exporters, in particular Myanmar (then known as Burma), Cambodia, and Thailand. The reliance of their rice economies on exports at this time encouraged them to export even at the expense of allowing domestic prices to rise, and their exports reduced the price fluctuations due to the El Niño and La Niña events of that decade. By the mid 1960s to 1970s, however, rice exports had become a smaller share of domestic production for all of these countries. In this situation, domestic considerations became paramount, and led to the tremendous price instability that existed from 1965 to 1981. Today, however, Thailand’s rice economy is once again dependent on exports (about 40 percent of domestic production), and Vietnam has emerged to complement Thailand as a consistent large exporter.

The renewed commercial orientation of Thailand was brought home during the major El Niño event of 1998, which caused a large production shortfall in Indonesia (Naylor et al, 2001) and resulted in the import of more than 6 million tonnes by some estimates. At the same time, the Thai baht had depreciated substantially due to the Asian financial crisis, and domestic rice prices surged 50 percent in Thailand in the span of just two months. During the world food crisis of the 1970s, the response of Thailand to increased domestic prices was an export ban, creating fears of rice shortfalls around Asia. But in 1998, Thailand continued to supply the world market and exported a then record of 6.5 million tonnes (Dawe, 2002).

China and India, with large stocks in the hands of their governments, also played key roles as market stabilizers in 1998, especially in the low-grade markets. Short-term increases in world prices during this time became quite attractive, and were capped by increased shipments from both countries. China increased its exports by nearly 3 million tonnes and supplied a large part of Indonesia’s needs at this time, while India increased its exports by even more, shipping much of the increase to Bangladesh and Africa. These types of responses were exactly how world markets behaved in the 1950s - fortunately, the period of price instability from 1965 to 1981 seems to have been an exception, not the rule.^[14]

New importers and reduced dominance of Asia

From 1961 to 1972, in the years before OPEC and before the Green Revolution began to spread widely, Asia (excluding the Middle East) accounted for 64 percent of world rice imports, and an identical share of world exports. Today, however, rice imports come from a much more diversified group of countries. While Asia’s share of world rice exports now stands at about 72 percent (1996 to 2002), its share of imports has declined to just 32 percent.

The primary reason for Asia’s relative decline on the import side was a strong increase in demand from the Middle East and Africa, with Latin America and the Caribbean also increasing its share to a more limited extent. The Middle East, with its economies enriched by increased oil revenues and attracting an influx of foreign workers, boosted its rice imports, and its share of world rice imports increased from 5 percent to 18 percent between the two periods. Africa increased its share of world imports from 9 percent to 22 percent, while Latin America and the Caribbean increased its share from 5 percent to 12 percent.

This diversification of world rice imports is reflected in the share of world imports accounted for by the top ten importers in any given year. In the 1960s, this share was about 65 percent, but today it has dropped to only 40 percent. In contrast, the top ten exporters have consistently accounted for about 90 percent of world exports during the past 40 years.

In general, both population growth and an increased share of rice in total calories have driven the increased imports in African countries. For example, rice accounted for just 2 percent of caloric intake in Nigeria in the late 1960s, but this share increased to 9 percent in the late 1990s. Even larger increases occurred in Mauritania and Mali, where rice now accounts for more than one-fifth of calories today compared to less than 10 percent in the late 1960s. Large increases in the dietary importance of rice have also occurred in Senegal, Côte d’Ivoire, Guinea and Guinea-Bissau. In the Middle East, however, e.g. Saudi Arabia and Iran, the increased imports have mainly been driven by increased population growth, with the share of rice in caloric intake being little different today than before OPEC. There has been a small increase in the share of rice in calories in Iraq, but not as large as in many African countries.

New actors and policies: is the role of government changing?

The dominance of governments in the international rice trade is much less today than in the late 1970s (Slayton, 1999), although the magnitude of this change is difficult to quantify precisely. Slayton (1999) estimated that, from 1995 to 1999, government to government (G to G) contracts, including food aid, averaged less than 7 percent of world rice trade. Slayton (1999) also estimated that 1.9 million tonnes of exports from Thailand, Pakistan, and Myanmar (then Burma) were under G to G contracts in 1980. If we add in 0.5 million tonnes of food aid from the USA in that year (US$A, 2003), then total G to G contracts were at least 2.4 million tonnes in 1980, or a minimum of 19 percent of world trade at that time. As the role of government in the international rice trade has diminished, so has the influence of large trading companies. Today, there are a larger number of smaller trading companies, which has increased competition and eroded trading margins (Slayton, 1999).

Although the longer-term trend toward a reduced role for government in the international rice trade is unmistakable, it is not clear if this trend will continue or in fact be reversed. Indonesia and Thailand, the world’s largest importer and exporter, respectively, provide interesting examples.

For many years, Bulog had a monopoly on Indonesian international rice trade, with decisions on import quantities being made ultimately by President Suharto (Timmer, 1996). Beginning in 1999, Indonesia allowed the private sector to import rice subject only to a tariff of 430 Indonesian rupiah per kg. For the past several years, the private sector has been responsible for about three-fourths of Indonesia’s imports. More recently, however, the government instituted a temporary import ban (to coincide with the main harvest), and has also issued a decree that will allow only specially licensed importers to import rice (previously, only a general import license was required). It is unclear if tariffs will increase in the future or how restrictive the licensing procedures will be, and how these developments will affect the role played by private traders.

Thailand began the process of liberalizing its international rice trade much earlier, with the role of G to G contracts generally diminishing over the past 25 years (Slayton, 1999), and taxation of rice exports being effectively abandoned by 1976 (Sriprasert, 2003). Until recently, however, there has been a resurgence of government intervention through implementation of an elevated floor price, leading to a build up of stocks in government hands unprecedented in the past quarter century (Sriprasert, 2003). But in the past few months, the majority of these stocks have been liquidated, and the new commerce minister has signaled that the government will not take on the role of competing with the kingdom’s private exporters.

State owned enterprises (SOEs) still play an important role in Vietnam’s international rice trade, but gradual liberalization is occurring (Tolentino, 2003). Initially, only a small number of SOEs were allowed to export, but the numbers have since been increased substantially. Furthermore, until recently, all rice exports were conducted by SOEs, but gradually private firms have been allowed to participate. Also, the government frequently tried to enforce Minimum Export Prices in the past, but this is less common today. There is now much less "central direction" to the country’s exporters.

Bangladesh liberalized its international rice trade in 1994, allowing the private sector to import. This liberalization was coupled with complementary measures to expedite customs procedures and avoid re-imposition of anti-hoarding laws. In response to the massive floods of 1998, the private sector imported 2.4 million tonnes of rice between July 1998 and April 1999. These imports stabilized domestic prices and averted a food crisis (del Ninno and Dorosh, 2001). The private sector is still allowed to import rice, although the magnitude of the tariff and the banking requirements vary from time to time. Elsewhere in South Asia, Pakistan fully privatized rice exports in 1996, removing the monopoly formerly enjoyed by the Rice Export Corporation. Sri Lanka allows private sector imports of rice (Slayton, 1999).

Other Asian countries have liberalized much less. Exports from China are still only in the hands of state-owned companies. The government of India still makes the key decisions that determine the quantity of exports that occur (even if the private sector negotiates the sales and handles the actual exporting). The Philippine government still strictly controls the overall import volume, with the result that domestic wholesale prices are often double what they would be if unrestricted private sector imports were allowed (Dawe, 2003). Farmers and other private sector importers are allowed to carry out some of the imports, but the government still has full authority over the quantity to be imported, who receives licenses, and the procedures that must be followed. Japan, Korea, and Taiwan have all increased their level of imports as part of the WTO negotiations, but protection in these countries is still extraordinarily high as the government effectively controls the quantity of imports through very high tariffs or quotas (Cramer et al, 1999).

The role of governments in international rice trade has also generally been declining outside of Asia. Nigeria had a ban on rice imports from 1985 to 1994, but since then has replaced this ban with a tariff that has varied between 50 and 100 percent (Akande, 2002). Senegal and Côte d’Ivoire privatized trade in 1995 and 1997, respectively (Slayton, 1999). In Latin America, governments have ceased to buy rice directly, instead using tariffs to regulate the volume of imports (Slayton, 1999).

Trends in Quality

Price differentials for quality are narrowing. With rising income levels and increased market liberalization, there has been a pronounced shift from low quality (defined as more than 20 percent brokens) to high quality (defined as less than or equal to 20 percent brokens) during the past 25 to 30 years. In the mid 1970s, low quality comprised 38 percent of the world trade (Prakash, 2004), but that percentage declined to just 25 percent in 1998-99. After the devaluation of the baht in 1997, the relative share of low quality rice is similar in Thailand (1998-2000), the world’s leading exporter, where it accounts for 32 percent of white long grain rice exports (excluding parboiled and glutinous rice).

During the past 15 years, the price differential for higher quality has narrowed substantially. For example, in 1990, Thai 100B commanded a premium of US$176 per ton (constant 2003 dollars) relative to A1Special (Figure 3). During the past three years, however, this differential has averaged about US$50 per ton. Similar trends are evident for comparisons of other qualities. Since the demand for high quality rice has increased over time, the narrower price differential reflects increased competition from Vietnam in this segment of the market, as well as improved milling and other technologies that are able to produce high quality rice on a more cost-effective basis.

While this price differential has been narrowing over time, the prices for different qualities today appear to be less integrated than in earlier years. In other words, a given monthly percentage change in the price of 100B is able to predict the concurrent monthly percentage change in the price of A1 Special much less accurately today than 15 years ago. Using monthly data on Bangkok prices from 1986 to 1990 (source of raw data is US$A), a regression of the first difference of the price of A1 Special on the first difference of the price of 100B (in log terms) yielded an adjusted R² of 0.57. Similar regressions were computed on a rolling five year basis, and from 1999 to 2003, the adjusted R² was just 0.22.^[15] One possible interpretation of this result is that as the price differential between high and low quality has narrowed, consumers are increasingly trading up. The increased reluctance to accept low quality rice as a substitute for high quality rice means that prices thus move more independently.

Paddy trade is growing in importance. In the early 1960s, paddy exports (on a milled equivalent basis) accounted for about 5 percent of total world trade. This was accounted for almost entirely by exports from Nepal to India. After a long period where it accounted for about 2 percent of world trade, it has increased its share to 4 or 5 percent once again. Today, it is primarily exports from the United States to Latin American countries. Although it is more costly to ship paddy because of the expense of transporting the lower-valued hulls and the extra space required, this trade is driven by a structure of import tariffs in Latin America designed to encourage local milling and, to a lesser extent, possibly by higher milling costs in the US.

As recently as 1992, paddy accounted for less than 5 percent of US exports. This share has increased steadily since then, however, reaching a peak of 36 percent in 1998 and averaging 29 percent from 2000 to 2002 (raw data from FAOSTAT). The increasing share of paddy in US rice exports appears to have increased fragmentation between US and Thai export prices as it contributes to higher local prices for rough rice. Using a procedure similar to that mentioned above, the monthly percentage change (first difference of the logarithm of price) in the price of Thai 100B was regressed on the monthly percentage change in the price of US#2/4 percent for successive five year rolling periods. For the regressions covering 1985-1989 up until 1993-1997, the average adjusted R² was 0.35. Beginning in 1994, however, paddy exports reached 11 percent of total US rice exports for the first time, and have increased much more since then. As a result, for the regressions covering 1994-1998 up until 1999-2003, the average adjusted R² declined to just 0.03. Thus, in recent years, changes in the price of US#2/4 percent have been almost completely disconnected from changes in the price of Thai 100B.

References

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Cramer, G.L., Hansen J.M., Wailes, E.J. 1999. Impact of rice tariffication on Japan and the world rice market. American Journal of Agricultural Economics 81(5): 1149-1156.

Dawe, D. 2002. The changing structure of the world rice market, 1950-2000. Food Policy 27: 355-370.

Del Ninno, C., Dorosh, P.A. 2001. Averting a food crisis: private imports and public targeted distribution in Bangladesh after the 1998 flood. Agricultural Economics 25: 337-346.

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Timmer, C.P. 1996. Does Bulog stabilize rice prices in Indonesia? Should it try? Bulletin of Indonesian Economic Studies 32(2): 45-74.

Tolentino, V. Bruce J. 2003. "Successful transition to the market economy: overview of the experience of Vietnam," presented at FAO seminar on rice sector policy: neighboring countries’ experiences, Yangon, Myanmar, October 3.

US$A-ERS (United States Department of Agriculture - Economic Research Service). 2003. Rice Yearbook. http://www.ers.US$a.gov/data/sdp/view.asp?f=crops/89001/, accessed December 2003.