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International Rice Trade: an analysis

by Dr. M. Salim 

Published in "The News"  Rawalpindi / Islamabad, Lahore and Karachi on July 10, 2006

International rice trade is limited, diverse, unstable and very complex. It is limited in the sense that its volume in the international market is comparatively smaller than other major commodities as is the quantity, which is limited in relation to its total production. It has been estimated that the volume of global rice market is about one-fourth of wheat and a little over one-third of that of maize.
One of the major reasons of the limited international rice market is that most rice producing nations are major rice consumers also. In spite of the limited global rice market, there has been a substantial increase in the total amount of its trade, with the passage of time. It has grown from 7 million tonnes in 1961 to 19 million tonnes in the 1990s and to more than 28 million tonnes in the year 2003.

The global rice trade is diverse and involves various types of rice from very short to extra long grain, very low amylose (glutinous) content to high amylose content, whole grain to broken rice, and aromatic to non-aromatic and so on. The amylose content (AC) determines whether the grain is hard or soft, sticky (glutinous) or non-sticky (non-glutinous). With the increase in AC, the hardness of rice grains increases and vice- versa. The concept of grain quality differs widely in different countries and even in different parts of the same country. Generally, long and medium grain rice with intermediate AC (indica rices) predominates in American and Southeast Asian markets.

Low income countries like Bangladesh, Philippines, Indonesia, Thailand and so on prefer long grain rice with high AC. On the other hand, high income consumers generally prefer low AC rice. The short grain and bold rice (Japonica rice) is preferred in Japan, Korea, north-eastern and central China. This type of rice becomes sticky (waxy) after cooking. Its trade however, is limited to only 1 per cent in the international market. In general people from Pakistan, India and various other countries do not like sticky rice.
African countries have increased the demand for low quality broken rice while Asian countries buy such rice for the brewing industry or for noodle manufacturing. The proportion of each category in the international market varies widely from year to year. The share of high quality rice is very high (75-77 per cent) than low quality rice (23-25 per cent). The proportion of aromatic rice usually varies from 10-15 per cent in the international market. Its share was 9 per cent during 1992-94 and increased to 12 per cent during 2001-2003. Aromatic rice is generally considered of high quality and their import levels are increasing. In the late 1980s, the trade of aromatic rice was only 0.6 million tonnes, which increased to 1.7 million tonnes in the early 1990s. International rice trade is quite unstable and undergoes a lot of temporal fluctuations. An analysis from 1981 to 2003 period reveals that rice trade increased from 10.6 million tonnes to 28.3 million tonnes.

All over the world, the trend of rice consumption and demand is changing. Various rice-importing countries have either achieved self-sufficiency or have become rice exporters. Countries like China and Indonesia in some years become exporters and in other years importers. Such changes result into major fluctuations in the international rice trade. With the improvement in the economic conditions or increase in the availability of financial resources, there is a shift in the demand from low quality to high quality rice. As rice prices decline, consumers do not purchase more quantity of rice but shift to better quality rice. In Japan there is a shift from standard quality rice to high quality rice. A similar trend is visible in various other fast growing countries including South Korea, Thailand and Malaysia.

Consumers of Thai urban areas are also shifting. It has been estimated that as the income of urban households in Thailand increases by 1 per cent, expenditure on high quality rice increases by 0.02 per cent. It is evident that the price of rice with the same intrinsic characteristics produced and processed in different countries may have a lot of differences depending on the production technology and post-harvest operations (drying, threshing, milling, grading, packing and storage). In general, in developed countries like USA and Australia, rice growing, processing, transplanting and packing are highly mechanised and avoid every type of contamination. But in most Asian countries, such procedures are not yet properly mechanised. Due to these variations a lot of differences in price are witnessed in the market.

Price differentials can also be on the actual or perceived differences in quality, which can be reinforced by brands, transportation differentials and commercial risks. Based on good production technology and better post-harvest operations, the price of US No.2 long grain rice was comparatively higher (US$24 per tonne) than Thai 100 per cent grade B during 1994-95. This difference in price increased to US$149 per tonne in 1997-98. The qualities of both of them are comparable. Likewise, the price of Vietnamese 5 per cent broken rice, good quality rice was about US$56 per tonne, which is lower than Thai 100 per cent grade B. Therefore, there is a lot of scope to increase our exports of rice in monetary terms by making improvements in the production technology including better drying, transportation, milling, grading and packing etc.

Different countries are in the process of making policy changes for making improvements in rice production, import and export. For example Nigeria lifted its rice import ban in 1994. Senegal eliminated the requirement for prior authorisation to import rice in 1992. Bangladesh liberalised rice trade in 1994. Japan and Korea opened their markets to rice under a minimum access quota in 1995.
India too lifted the ban on export of non-Basmati rice in 1994. In 2001, it started conceding subsidies on non-Basmati rice exports. Rice producers in India continued to get benefits from high government subsidies on inputs, power and irrigation and got protection through support price. Different countries are making strategies to enhance rice production and achieve sustainability. Bangladesh is making efforts to achieve self-sufficiency in rice production. Major emphasis is on the promotion of rain-fed rice production by development of drought tolerant rice varieties and encouraging rice farmers to adopt new technologies through the provision of high quality seed, irrigation, training and so on. To enhance rice productivity, Cambodia has taken a number of initiatives during the recent years including elimination of 5 per cent agricultural tax within five years and managed direct payments to grain producers and providing seed to farmers on subsidised rates.

The government of Iran is providing support to rice producers by providing high support prices and promoting dissemination of improved production technologies to achieve self-sufficiency in rice production. The Republic of Korea is making efforts to enhance rice productivity by encouraging farmers to grow high quality rice in specified areas. The Philippines provided 50 per cent subsidy on certified seeds and fertilisers through a scheme. Thailand is implementing a national rice strategy during 2002-2006 and has earmarked Baht 90 billion (US$2 billion) for the construction of silos, research and development promotion and market price stabilisation. Rice demand in Asia will increase from 309 million tonnes in 1993 to about 410.5 million tonnes in 2020. In Southeast Asia, increase in demand will be about 38 per cent in the same period. In eastern Asia increase will be by 15 per cent only. The increase in the high quality indica rice trade will be more than other types of rice. With economic development, middle class consumers and urban residents are likely to shift to high quality indica rice. Moreover, the richer countries of sub-Saharan Africa are expected to show a strong demand for indica rice whereas increases in the japonica market will be only 4 per cent during 1993-2020.

Given the high demand in the days to come, improved production technology and appropriate post-harvest operations like threshing, drying, milling, grading, packing, transportation and storage need to be encouraged. There is also a need to improve nutritive value of rice grain. Iron and zinc fortified and vitamin A-enriched rice grains will prove very useful to millions of poor especially women and children in Asia and Africa. Maintaining rice exports at the same level seems difficult since it involves lot of awareness and marketing skills. But the increasing value of rice trade will make the effort worthwhile. It is imperative to do in-depth short, medium and long term analyses on rice production and marketing at the global level and then develop a strategy not only to maintain the present level of exports but enhance rice export from Pakistan.

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