By Rajendra Rampersaud
The present rice shortage is currently creating havoc with the global economy after years of unfair treatment to rice farmers. Despite the fact that less than seven per cent of total rice production is traded in the world market, rice remained a sensitive political substance in the commodity market. A combination of production subsidies, tariffs, and non tariff barriers that distorted rice production, distribution and consumption in the past have led to this present situation. This article looks at the growing unfulfilled demand for rice that is unprecedented since the Second World War as hunger and rising poverty sit at the heart of millions of people. The analysis concludes that even though the present world rice shortage presents a threat, Guyana has a unique opportunity to increase both output and export of rice.
The world economy is today suffering from a shortage of rice considered one of the staple diets for the world population. The World Bank considered rice as one of the most important food grains accounting for over 20 per cent of global calories. World stock of rice is now at its lowest level with production intercepted by a combination of weather, exodus of farmers and price related problems. Based on FAOSTATS the rising rice prices began in late December 2006 as it moved from US$305 to US$376 by the end of 2007. However, even steeper increases were recorded in the first quarter of this year; the Economist (05-17-08) stated that since January the price of rice increased by 141 percent. Further, for last week alone Reuters reported that the price jumped by 5% in Thailand taking prices to $1000, almost triple the level at the start of the year. Policy makers have been responding with very rigid policies such as banning and limiting the export of rice. With the current global food shortage, this policy is very short term. While the benefits of the famous Green Revolution of the 60s are fully exhausted new policies to stimulate output have to be put in place to deal with this untenable situation.
Even though the world rice market has been expanding rapidly since the late nineties just around 25 million tonnes of rice or 5 to 6 % of total rice production is traded on the international market. Gulati and Narayanan (2002) argued that the rice market has been characterized by thinness, volatility and segmentation. This has led to stagnation and uncertainty of the rice industry especially in developing countries such as Guyana. Gulati and Narayanan (2002) further pointed out that the rich OECD countries granted Producer Support Estimate (PSE) to rice as much as 76 percent in 1997-1998 periods, considered the highest subsidy for agricultural commodities. However, both developed and developing countries are guilty of distorting rice trade but the biggest culprits are the US, EU and Japan.
Their policies have led to the impoverishment of rice farmers and an increase in rural poverty in developing countries.
Wailes and Durand -Morat (2003) utilizing the spatial equilibrium Rice Flow model found that a complete liberalization of the rice market could result in an expansion of nearly 3.5 million metric tonnes or a 15% increase being traded annually, with the bulk of the net welfare gain of $7.4 billion accruing to rice exporting countries that will benefit from higher export prices of 25-35% and expanded output. However, given entrenched partisan political interest it is not difficult to see why the so called DOHA Development Trade Round (DDA) has stalled especially on labour intensive agricultural products where developing countries have a comparative advantage. Now is the time for the WTO to restart the DDA Trade Round and reduce the trade weighted average tariff on rice estimated at 43.3 percent to stimulate output and satisfy increasing demand.
The importance of rice to Guyana is well established being the second largest contributor to the country’s GDP. The National Development Strategy (2001-2010) devoted an entire chapter to the importance and the need for sustainable rice production. Moreover, there was a Strategic Plan (2001-2010) for the rice industry of Guyana funded by the IDB with the participation of the key stakeholders in the industry.
This document identified as its first goal an increase in productivity and production on a sustainable basis. It targeted increasing national average yield from 26.3 bags/acre to 38.6 bags/acre by 2007. I have no current data on yield but in a recent NTN programme with general secretary of the RPA Mr. Dharamkumar Seeraj along with a foreign expert it was pointed out that yield remained low despite Guyana being cost effective among its competitors. Higher yields cannot be switched on automatically.
Investment in drainage and irrigation and research on better quality seed are the key to yield. The time to successfully come up with a new quality seedling is on average 10-15 years says Bob Zeigler of the International Rice Research Institute.
The main challenge facing the Guyana’s rice industry is the diversification of product and markets. Almost all by-products of rice can be used as inputs for an additional value added product, for instance rice for breakfast cereals and rice flakes, broken rice for brewery, animal and poultry feed, rice husks for fuel and rice straws for art and craft. I think that Guyana Stockfeed Ltd. has somewhat of a chain line with the backward and forward linkages. In terms of market, it a puzzle that despite being an early exporter of rice the export of this higher value added package rice with a brand name product has not grown. The Karibe rice is another example in this regard. Value added product from rice will mitigate the vagaries of the fluctuating fortunes of commodity prices.
Even though the current situation provides a threat, it provides an opportunity for Guyana’s rice industry. Sir Arthur Lewis Nobel Prize Winner (1979) for his contribution on Development Economics in the Schumpeter Memorial Lecture on a New International Order at Princeton University, New Jersey pointed out that the most important item on the agenda for developing countries is to transform the food sector and create an agricultural surplus to feed the population thereby creating the bases for industry and modern services. His model has been successfully replicated in East Asia, Chile and elsewhere, it is only the Caribbean that is found wanting.
Finally, I am convinced that given the right incentives rice farmers will rise to the challenge to make Guyana the bread basket of the Caribbean.
