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Rice prices are likely to rise sharply for the second
straight year in 2009 as the global economic slowdown hits farmers
and consumers alike, the International Rice Research Institute
warned Friday.
The worldwide credit crunch would
make it hard for farmers to secure cash to purchase essentials, such
as seeds and fertilizer, the Philippines-based body said in the
latest edition of its quarterly journal Rice Today.
At the same time, it added, the
economic downturn may increase demand for rice in developing nations
as falling income forces poor people to switch back to less
expensive staples.
The price of rice—a staple food
for half the world including nearly 700 million poor Asians—spiked
to $1,080 a ton last April, triggering fears of social unrest.
It slid to about $575 six months
later because of record production and the early effects of the
economic slowdown.
But the current rice export
prices remain around double those of mid-2007.
Credit crunch complications
But the institute warned that
“production uncertainty due to tight credit and declining rice
prices combined with strong demand growth points to another rise in
rice prices in the coming months.
“Price volatility will remain
high.”
Even if they had the cash,
farmers burned by the sudden plunge in commodity prices “will
likely play safe and reduce input for their 2009 crops.”
The institute pointed to a
decision by the Philippines government to lower its 2009 rice output
estimate by almost 4 percent, and said a similar move from other
rice producers “is likely in the near term.”
While global rice output reached
record levels for each of the last four years, this was achieved
through increased acreage and obscured the key issue of declining
growth in rice yields owing to reduced agricultural investments
since the early 1990s, the IRRI said.
As the world consumed more rice
than it could produce in five of the last seven years, it forced
governments to dip into their reserves to make up the shortfall.
Historic low levels of rice
stocks contribute to the volatility, it added.
While rice prices have dropped
from their 2008 peaks, the IRRI said, “they are still high
relative to 2007 levels, and are likely to remain too high for
millions of poor.
“If the yield growth rate does
not improve, we can expect rice prices to continue to rise, and at a
faster pace than that seen since prices started moving up in
2000.”
The world produced a record rice
crop with most of the increase coming from area expansion rather
than yield growth, said the expert, adding that the rice yield
growth has been slowing down since the early 1990s.
Boost yields
There is no other way out than
improving the yield growth to solve the world rice shortage, caused
by “fundamental imbalances in supply and demand,” Samarendu
Mohanty, an expert of IRRI, said also on Friday.
In five of the past seven years,
rice consumption has exceeded production, resulting in frequent
dipping into the world’s buffer stocks to cover the shortfall, he
added.
The key solution lies in
“revitalizing rice yield growth through higher investment in
research and infrastructure development,” said the expert.
Mohanty’s opinion was echoed by
his colleagues in the research institute.
“The task ahead is challenging
but not insurmountable and requires a substantial boost for
agricultural research, which remains highly underinvested,”
according to another journal article, jointly written by Sushil
Pandey, Mark Rosegrant, Timothy Sulser and Humnath Bhandari.
“Increased investments together
with policy reforms that make rice markets more efficient will
provide the ultimate solution to the rice crisis,” it said.
Amid the crisis
The recent crisis turned the
world’s attention back to agriculture, but the credit crunch is
likely to further tighten funding for infrastructure improvements
and research and development activities, he said.
Mohanty noted that many farmers
who in late 2008 harvested a lower-priced crop produced with
high-priced seeds and fertilizer.
“Burned once, these farmers
will likely play safe and reduce input use for their 2009 crops,”
Mohanty said.
The credit crunch will also make
it difficult for farmers around the world to secure credit for
purchasing inputs.
The Philippines, for instance,
has lowered its 2009 rice production estimated by almost 4 percent,
because of lower input use as farmers struggle to secure credit to
buy seeds and fertilizer.
Production uncertainty because of
tight credit and declining rice prices combined with strong demand
growth points to another rise in rice prices in the coming months,
warned the expert.
Making matters worse, the
economic slowdown may increase the demand for rice in developing
countries as falling income forces poor people to switch back to
less expensive staples.
Consumption projections may,
therefore, rise above earlier estimates of around 90 million tons
per year of additional unmilled rice by 2020, according to the
International Rice Research Institute.
--AFP And Xinhua
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