Food Outlook No.4 - October 2002 p.9

The new FAO Export Price Index for Rice

This edition of Food Outlook launches the new FAO Export Price Index for Rice (1998-2000=100). The previous index employed the Laspeyres formula, under which prices were weighted according to their importance in global trade in the base period (1982-84=100). Until recently, this index was considered to provide a satisfactory measure of relative movements in export prices. However, important changes in the structure of international trade have taken place, including major shifts in the market shares of different exporters and in the types of rice traded. In addition several new rice exporters have emerged on the global arena. While the new rice price index takes stock of these market developments, it also gives consideration to some theoretical advances in the treatment of index numbers.

A more detailed description of the new index will be available in the October issue of the FAO “Rice Market Monitor” (http://www.fao.org/es/ESC/esce/escb/rice/monitore/ricemone.htm) and a complete exposition will be published in the forthcoming FAO “Review of Market Issues”. However, a summary of its main features is as follows:

• the base period is now set over the 1998-2000 three year average;
• sixteen export quotations are employed in its construction, one more than in the previous index;
• the new index is divided into three broad market groups defined by rice variety: indica, japonica, and aromatic (comprising basmati and fragrant rice), with indica subdivided into high and low quality rice. The sub-indices were selected in accordance with the “Generalized Composite Commodity Theorem”;
• owing to the properties of this theorem, the sub-indices do not employ weights, however, the “total” index weights the sub-indices according to their corresponding trade shares in the base period.