Rice Shortage Threatens Asia

A child plants rice in south Luzon, Philippines. The country is one of many in Asia that fears a rice shortage if current trends continue. (UPI/SNP Photo/Junichi Fukushima)

TORONTO, Ontario, Canada, Three billion people in Asia are the rice guzzlers of the world and they are facing a supply shortage. Production at about 420 million tons a year has been static for the past four years. In this period about 100 million additional mouths have been added, which are putting a dent in the supply-demand chain.

Prices of rice have shot up 30 percent in the two years from 2005 to 2007 and 40 percent since the middle of last year alone. These have reached a level, like wheat prices -- which are 130 percent up -- that have made governments nervous. India has banned the export of most varieties of rice, except the high-end basmati rice, to conserve as much rice at home as possible. Other rice surplus countries have followed suit. They are scared of shortages at home and the unrest that follows shortages.

A Chinese saying of earlier times is directly applicable to today's food shortages: "When the price of rice goes higher than a common man can pay, heaven ordains a new ruler."

In Haiti, the prime minister was dismissed after food riots. In Egypt, less publicized food riots have created a storm. In Pakistan, gun-toting police have been guarding food warehouses for the last six months. In Thailand, farmers with guns are guarding their rice fields. Even if the world gets over the present crisis, future crises are likely to be much more severe. Expensive food or severe food shortages will topple governments and unrest will follow.

Of the world's rice, 80 percent is grown in Asia -- which also consumes it all, plus some. Rain plays the greatest role in rice cultivation. Lack of rain is sad news for rice growers. Rice cultivation is labor intensive, making it unproductive in countries with high labor costs in Europe and North America.

A wide variety of rice is grown in Asia, of which basmati rice from India and Pakistan and pathumthani fragrant rice from Thailand are top quality. The latter is a benchmark for rice pricing.

Driving today's food price increases are the tripling of oil prices; the conversion of good cultivable land in the United States to biofuel producing corn; the negative impact of climatic changes; and the general inability of governments to focus on food grain production both in India and China. This has resulted in all food grains, including rice production, remaining stagnant. Crop failures in a particular year exasperate the situation, which occurred this year with lower-than-expected crops in Australia and the United States.

World trade in rice is about 30 million tons. Major exporters are Thailand, Vietnam, the United States, India and Pakistan. The United States does not produce a lot of rice -- about 8 million tons a year -- but it exports half of its output, which gives it a major status among exporting countries. Rice importers are Indonesia, Brazil, Iraq, Philippines, Bangladesh and the Arab world.

Indian rice paddies produced about 140 million tons in two sowing seasons in 2007, about 1 percent higher than the previous year. This produces about 93-94 million tons of milled rice for human consumption. Last year India exported 3.6 million tons of rice. This year it will be a lot less. With a rising population, this exportable surplus is shrinking. Only a month ago India resorted to an export ban on rice. Bangladesh is the most affected by this ban.

India maintains about 20 to 22 million tons of reserve rice stock, which is used to feed the poor at subsidized prices. It is drawn down during a bad production year. Later it is supplemented during a good harvest year.

Chinese paddy crop output has been at about 180 million tons a year, giving about 122 million tons of milled rice. This production is in balance with its demand. At times, China imports rice to relieve spot shortages. A carefully managed public distribution system maintains about 40 to 42 million tons of reserve, enough to tide the country over if there is a major climatic event. If a climatic event results in a production drop, however, the public distribution system will break down. These climatic changes are unpredictable. Nobody could predict that central China would be buried under huge piles of snow last season.

With its focus on industrialization, China has paid less and less attention to agriculture; hence agricultural production is not keeping pace with demand. In addition pollution and acid rain are playing havoc with agriculture.

China and India are vulnerable to a drop in rice production, but they have large reserves. It is the rice importing countries that are hit the worst, relying on imports to supplement local production. Although the Philippines is not short of rice today, if trade in rice is halved from 30 million tons a year, the impact on its supply will be great. That is one reason that supplies of rice are very carefully watched in the Philippines.

The U.N. Food and Agricultural Organization is optimistic about getting over the present spot shortages of rice. It expects a 7 to 8 million-ton increase in rice production in 2008. Production is expected to recover in Africa and Latin America and additional incentives to farmers in Asia may bring results. This may help to dampen the current market volatility.

The long-term prognosis is not good, however. Until the world refocuses on increasing its food grain output and controlling the population, supply shortages, followed by food riots, are going to be the norm.

Spiraling inflation in India and China is mainly due to higher oil and foodstuff prices. When India and China calculate inflation based on local conditions, foodstuff accounts for about 30 percent of the inflation factors. Oil is the next big factor. Inflation at 7 percent in India has put the political survivability of the present government in doubt, although it is less to blame. Food price increases are a worldwide phenomenon and India cannot control the world. This is true in China also. China is also running 9-10 percent inflation, with food prices leading the price increases. China, like India, cannot control it, although China's problem is rooted in unbalanced development.

A lot of these supply shortages have their root in excessive industrialization drives both in China and India. Along with the West's excessive love affair with cars, they are responsible for today's oil shortage. The tripling of oil prices was a signal for price increases for other commodities. Now inflation has taken hold, it is unlikely to be tamed easily.

China and India consciously fell into the trap of industrialization, dependence on foreign direct investment, and infrastructure renewal in the last 15 years. They ignored the very basic necessity of life -- food grain production. The Chinese believed that with a mountain of cash at hand they could buy food anywhere. That turned out to be a mirage as food surpluses have disappeared all over the world, and there is nothing they can do with their reserves.

Unwittingly, India followed the Chinese example. Since the mid-1990s, India concentrated on industry and let agriculture take a back seat. In the last five years India's total grain production, including rice, has been stable at about 208 million tons. This year it is projected to be 215 million tons. The latter amount will feed the nation and replenish the reserves. This may be good for today but the future is bleak. To feed the rising population, a 4 percent sustained growth in agriculture is needed.

In summary, the rising prices of rice, wheat, corn and oilseeds are a big factor in inflation in India, China and the rest of the less-developed nations. There is not a serious shortage yet, but rising population will dent the supply. If governments do not tackle this effectively today, civil unrest will follow.

(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)

India is very capable of having localized shortages, due to inefficiencies in distribution and also fraud. But the main problem has been inflation, as I hear it.

The Japanese heavily subsidize the cultivation of the inferior grades of rice that will grow well in a temperate climate.

They keep down imports from the US to keep internal demand high for the inferior rice.

Problem with this article is that biofuels have no impact whatsoever on rice production in the US, and the US crop is still only 1/10 of the production of all exported rice in the world.

Increased demand combined with reduced rice production due to Global Cooling is the cause.

“Yes, the ones suffering are the net food importers- Indonesia, Bangladesh and the Arab “world” mainly, and not China or India”

Food exporting nations need to form an organization called OFEC and fix prices of food to OPEC nations at about 50 times the domestic price.

Not entirely joking.

As has been posted before, why don’t we offer the world one bushel of grain/rice for one barrel of oil? It seems a fair trade to me.

My uncle's neighbor farms Horseradish in Northern Minnesota, after a couple of years he floods the fields and farms rice on them to kill off the old roots and amend the soil. Perhaps he will produce more rice this year instead of Horseradish.

At the rate things are going, the southern USA--especially near the Mississippi River regions--could end up being one of the world's biggest exporters of rice, since American farming methods mean high yields per acre/hectare and less farmers needed to make all that rice.

Interestingly enough, I haven't heard a peep about rice and wheat shortages in China, since they've learned the lesson of the ill-advised Great Leap Forward and made sure that they grow enough rice and wheat for local consumption. The price of Thai jasmine rice has gone up but most rice consumed in China is grown domestically, so....

Can’t get a date.

Gotta do something!

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