Huge rice stockpiles make food crisis unlikely in Asia (Feature)

By Peter Janssen Feb 24, 2011, 4:33 GMT

Bangkok - Soaring food prices may have helped ignite the popular protests shaking Tunisia, Egypt and now Libya but no similar food shocks should be expected in rice-eating Asia, according to Food and Agriculture Organization (FAO) experts.

World Bank President Robert Zoellick warned earlier this month that world food prices had reached 'dangerous levels,' up 29 per cent in January year-on-year, and 'could have social and political implications' in regions such as the Middle East and Central Asia.

These regions comprise wheat-eating cultures, and wheat prices have soared 70 per cent on the world market since Russia slapped a ban on its wheat exports in October.

Russia and Ukraine usually export 25 million tons of wheat a year, much of it destined for Middle Eastern countries such as Egypt, according to FAO figures.

In recent months, international prices for rice - the food staple for more than 3 billion people living in South and East Asia - have seen only modest increases.

'If you compare the rice price to other commodities such as wheat and corn, the increase has been minimal, up less than 20 per cent over the past year,' said Chookiat Ophaswongse, honorary advisor to the Thai Rice Exporters Association.

Thailand is the world's largest rice exporter, shipping about 9 million tons of the grain a year.

Soaring rice prices were blamed for the 'food crisis' of 2008, when prices peaked at 1,100 dollars a ton. Currently the price is 530 dollars a ton.

The huge spike in rice prices in 2008 was attributed to two factors - rising oil prices which increased the cost of petroleum-based agricultural inputs such as fertilizers and pesticides, and India's decision in December 2007 to ban rice exports.

India's ban was followed by similar export bans in China and Vietnam, creating a panic among rice-importing nations that was happily answered by Thai rice traders.

There was no actual rice shortage in 2008, just as there is no looming shortage now.

'In terms of food security, there is enough rice and that's what matters in Asia,' said FAO policy officer Sumiter Broca. 'The point is that a lot of these countries are self-sufficient in rice now.'

More importantly, both India and China have plenty of rice in their stockpiles, and have essentially been out of the international rice markets since 2008.

Their absence from the world market has been good for rice price stability.

'China's and India's combined population is in the order of 2.5 billion people,' Broca. 'If these countries were to enter the international food market in a big way there would be chaos.'

Reports that China's secondary wheat crop may be affected by drought this spring have already affected world prices, although the FAO said it believes the fears may be exaggerated.

'Even if the crop were to be totally destroyed, which is unlikely, the maximum loss you're looking at is 26 million tons out of a total production of 115 million tons,' Broca said. 'And they've got a further 50 million tons in stock.'

India is expecting a bumper harvest of 80-85 million tons of wheat this year, making imports highly unlikely.

Fears of a shortage of wheat imports in 2007, due to the impact of drought on the Australian crop, was one of the reasons India banned rice exports that year, to ensure it had sufficient food stocks.

This year, only Indonesia, Bangladesh and the Philippines are expected to be significant rice importers in Asia. Africa and the Middle East will also be in the market.

There are no indications that the world's two largest rice exporting nations, Thailand and Vietnam, will have any problems meeting demand.

Thailand's main rice crop was only slightly affected by flooding last year.

'The production has come down a little bit but as everyone knows, the government's stockpile is huge,' Chookiat said.

Thailand released 4 million tons of that stockpile to private traders late last year, and only half a million tons has been exported.

'That's one reason the rice price doesn't move up too much because everyone knows Thailand has ample stocks in hand,' he said.

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