Will Asians start thinking of rice as an occasional semi-luxury rather than a staple for all? Or is rice consumption just going to decline naturally as Asian diets become more diversified?
Both apparently contrary trends could happen simultaneously. What is certainly true is that rice does not fit the same demand/supply patterns of other staples. Although per-hectare rice yields have been rising slowly in most countries, no repeat of the "green revolution" productivity leap of a generation ago is in the offing. It is also noteworthy that very high yields are occurring in countries like Japan and South Korea, where prices are kept very high, enabling farmers to maximize inputs. The last thing the rest of Asia, let alone the world, wants is to see Japan-Korea style subsidies protect the "culture" of rice growing for its own sake regardless of market pressures.
The recent sharp increase in rice prices, causing riots in some countries and anxiety in many others, may seem just a short-term problem, with rice experiencing the same global supply shortfall as other grains after years of low prices and gradual declines in global stocks. In the case of rice these problems are aggravated by the low level of international trade in rice.
As it is, even countries with plenty of foreign exchange find it hard to import what they need. It is a reminder of a similar situation that occurred in 1973 when Filipinos and even Koreans were urged to eat a corn and rice mix to compensate for rice shortages.
The low level of international trade in rice ‑ less than 10 percent of global output – is just one factor that distinguishes rice from staples like wheat, corn, sugar, soybeans and vegetable oils.
The current shortages cannot be directly attributed to most of the factors affecting the other crops. Rice is not used for bio-fuels, it has not been subject to any serious weather disasters in the major producing regions, and as it is not a major commodity in futures markets in Chicago and New York so it has not been subject to the inflow of speculative financial capital which has allegedly driven up the prices of other commodities.
The only major production problem rice shares with the other grains is the high price of inputs – fertilizer and fuel for machinery, both directly related to oil and gas prices. Indeed the full effect of these inputs, often delayed by stocks or subsidies, has yet to be felt.
In theory the two largest rice producers, China and India, should both be capable of producing a lot more than they do and becoming large suppliers to the rest of the world, rather than small ones at present. While land productivity in China’s wheat-growing north is already very high, in the south, which is better suited to rice, it remains quite low, at least compared with Taiwan. India has even greater scope for increasing land productivity.
However there are several reasons why this looks unlikely to happen. In China they include the rapid loss of flat land ideal for paddy fields to urbanization, and concerns about both the quality and quantity of water supplies. Although southern China in principle has lots of spare water, demands for it are numerous. Then there is the labor factor. Even with large inputs of machinery, rice production is quite labor intensive. Young workers are leaving the backbreaking work if they can and farmers do not have the capital to invest in labor-saving machinery and increased use of costly fertilizers.
Prices may need to go much higher yet to induce the increases in both land and labor productivity needed to raise output significantly.
Nor, from a national standpoint, is the government interested in increasing rice exports. Its concerns are more with reducing import dependence for other crops, notably soybeans.
In India too, food pricing policies are more driven by the need for stable supplies and approximate self-sufficiency in grains. As for land productivity, big gains look unlikely until irrigation, road and other issues receive more investment. Meanwhile fertilizer and consumer subsidies have been increased by rising prices and so even less money may be available for public investment in this sector.
In Southeast Asia, the picture is no more encouraging. The Philippines has been a rice importer for most of the past 100 years. Apart from a few years during the Marcos period, rice production has not been a priority so import demand has grown steadily. With a population growing faster than rice productivity, it will do well to stabilize imports, but self-sufficiency is out of the question. Rice import needs would be even higher but for the increasing consumption of wheat-based products.
Indonesia is in a rather similar situation. It may be less worried, if only because, thanks mainly to palm oil, it is a net food exporter. However, given its size it has reason for concern about the thin nature of the global rice market.
The two main global suppliers, Thailand and Vietnam, are unlikely to see more than modest growth from now on. Vietnam’s remarkable production surge will be slowed by urbanization and salination problems in its delta rice-growing areas. Burma has the potential to be a big exporter again, but do not hold your breath for the kind of drastic change in regime that would make it possible.
Meanwhile, outside Asia, global rice demand is growing much faster than supply. Rice has become a staple in parts of Africa even where there is little local production. This is causing much hardship and explains why Africa is suffering more than Asia from rice prices. The oil rich Middle East is also a big rice buyer and will likely keep prices high.
On the production side outside Asia, most of the potential for increases in production are in South America but the focus is on extensive, machine-intensive soybean and wheat cultivation not on rice, with its big inputs of the scarcer resources in those areas – labor and water. In Europe and North America, the return of set-aside land into production will have almost no impact on rice. In Australia, drought fears will shift irrigation water to higher value crops than rice.
Generally, there is not much land left in the world to be brought into agriculture. Of what there is, very little is particularly suited to rice’s needs for warmth, water and flat land. And most of that is in unruly parts of Africa.
On balance these combined influences could well keep prices high without inducing large gains in output, in which case lower-income urban consumers may find themselves switching permanently to substitutes such as wheat-based noodles or even corn. Meanwhile higher income consumers are anyway switching from rice to animal protein and fat-rich foods derived from corn, soy and various vegetable oils.
These trends may not be either undesirable or stoppable. But if price pressures force them to happen quickly, unrest is unavoidable. The best that governments can hope for is that consumers recognize that rice at all times is a cultural necessity but that a wider diet is more interesting and perhaps more affordable. One way to do that over time is to reduce subsidies for rice consumption while allowing rice farmers to enjoy higher returns from their back-breaking work.