[Vnbiz] Asia faces growing rice crisis

[Tai Phan]

*Asia faces growing rice crisis*
by Raja M

MUMBAI - An Indian government ban of rice exports has plunged neighboring
Bangladesh into crisis, in a grim preview of growing global grain shortages.
Leading rice-exporting nations such as India and Vietnam are reducing sales
overseas to check domestic price rises. Previously healthy buffer stocks in
the world's largest rice exporter, Thailand, are shrinking.

The February 7 ban by India's Ministry of Commerce and Industry intensifies
a worldwide rice shortage that according to the Rome-based United Nations
Food and Agriculture Organization drove up prices by nearly 40% last year.
Large rice importers such as Myanmar, Afghanistan, Pakistan, Bangladesh,
Indonesia and Malaysia are worst affected.

An additional 50 million tonnes of rice is needed each year up to

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2015 to plug the demand-supply gap, according to the Manila-based
International Rice Research Institute (IRRI), equivalent to a 9% annual
production increase from current levels of 520 million tonnes.

Intensifying price pressures, additional agricultural land for growing rice,
a dietary staple for more than half the world's 6.6 billion people, is
extremely limited, say analysts, while rice consumption is growing worldwide
and wheat stocks are hitting record lows. The US Department of Agriculture
has reported three-decade lows in wheat stocks, and India - Asia's largest
wheat producer - expects lower production for 2008.

Unregulated private cross-border trading makes exact figures hard to come
by, says Duncan Macintosh, director of the IRRI, told Asia Times Online from
his Manila office. "Besides, Asian governments have a strategic interest in
rice stocks and any declared shortage will send prices shooting up,"
Macintosh says.

India's rice export ban seems born out of such price rice fears, and comes
at a sensitive time ahead of the final annual budget to be presented by the
ruling United Progressive Alliance government on February 28 before the
country's general election next year.

India's ban on rice exports follows a gradual limiting by the government of
exports over the past few months. In October 2007, rice exports priced under
$425 per tonne were banned and on December 31 the floor price rose to $505 a
tonne.

The February 7 ban extended to all exports of rice except
government-to-government trading, but excludes exports of basmati rice, a
more fragrant, long-grained and expensive variety. The government will
supply a previously committed 500,000 tonnes of non-basmati parboiled rice
to Bangladesh at an average of US $399 per tonne, excluding insurance and
freight.

The exemption was not much consolation to Bangladesh, which desperately
needs food grains after Cyclone Sidr in December destroyed $600 million
worth of the country's rice crop. Rice prices soared 70%, hitting hard a
population in which the majority survive on less than $1 a day. In the rare
years that the country is free of climatic disasters, Bangladesh produces 28
million tonnes of food grains, meeting 95% of domestic needs.

To cope with the rice crisis, the Bangladesh government in January floated
global tender notices for 300,000 tonnes of various varieties of rice. The
country is also importing 180,000 tonnes of white rice from neighboring
Myanmar.

The Kolkata-based national daily The Statesman reported that India's export
ban caused 300 rice trucks to be stranded in India-Bangladesh border zones
such as Mahedipur land customs station in English Bazaar and other land
ports in West Bengal. Rice traders on both sides face losses and are
threatening to take to the streets if the Indian government does not
reconsider the ban.

Worse, in a repeat of a disaster that last struck in 1959, a famine
threatens remote areas of southeast Bangladesh after millions of rats
devastated food crops as the rodents reproduced in dramatic numbers
following a flowering of bamboo forests that happens every 50 years.

The rat breeding out-paces the bamboo flower growth, and soon the animals
turn to ravaging rice stalks and vegetables in the affected region.
Northeastern India has been similarly hit after bamboo forests in Mizoram
began blossoming in 2007. Local authorities declared the area a disaster
zone but the Indian government has not yet announced plans to combat this
bi-century rat storm.

Long-term trends and short-term shocks are both putting pressure on rice
prices. Higher incomes across Asia are leading to increased consumption of
grains and vegetables and of meat, which leads to more grain being diverted
for use as cattle fodder. Production of biofuel further squeezes supply,
while the drift off the land by workers and into industry curbs the supply
of labor.

"There is less land, less water and less labor available for rice growing
across Asia," says Macintosh. "Agricultural labor in countries like Thailand
is increasingly shifting to industrial sectors. And rice is the most labor-
and water-intensive crop."

In the shorter term, prices can spike as natural disasters ranging from
severe drought and floods cause havoc on agriculture. The recent three-week
snow storms in China caused $7.5 billion in damages, according to early
government estimates, including destruction of winter crops leading to a
$700 million relief package for farmers.

Asian countries are making different responses to domestic and international
demand. Vietnam in the third quarter last year suspended exports to protect
domestic needs amid insect epidemics, while in the other direction Thailand
plans to auction an additional 500,000 tonnes of rice to cater to increasing
international demand, particularly from Bangladesh and Pakistan. Thailand
exported 800,000 tonnes of rice in January 2008, a 25% year-on-year
increase.

As a long-term measure, food scientists are developing sturdier varieties of
rice that can withstand climate challenges as well as higher yielding seeds.


Asia averages 3.6 tonnes of rice per hectare, according to the IRRI. Better
yielding varieties will increase average output to six tonnes per hectare,
particularly in Thailand, which grows rice across 9.8 million hectares but
has the lowest rate of output in Asia - 2.6 tonnes of rice yield per hectare
in the planet's largest area of land made available for rice cultivation. In
contrast, China's produces six tonnes of rice per hectare and Japan has the
global record at 6.2 tonnes.

The world's leading philanthropists are pitching in to combat the rising
grain crisis, similar to supporting cancer and AIDS research. Leading the
way, Microsoft chairman Bill Gates in January announced a grant of $19.9
million over three years to the IRRI. The grant from the Bill and Melinda
Gates Foundation aims to first help 400,000 small farmers in South Asia and
sub-Saharan Africa access improved rice varieties and better growing
technology.

Farmers may increase yields by 50% by 2018, but "there are no short-term
solutions," says Macintosh of the IRRI.

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