China’s shrinking rice crop spurs price boom
Manila Times, June 09, 2004

BANGKOK—Thailand, the world’s biggest rice exporter, is in the midst of a boom fuelled by the demands of one country: China.

Thailand’s rice exports to China more than tripled in the first four months this year, surpassing last year’s total China shipment by 37,000 metric tons, according to the Thai Commerce Ministry. Rice export earnings rose 41 percent to $680 million.

Farmers from the US to India are benefiting from surging prices for the grain. Futures contracts for unprocessed rice reached a seven-year high, equivalent to $253 a metric ton, last month at the Chicago Board of Trade. Prices may rise further if China, the biggest producer and consumer of rice, becomes a net importer of the grain this year.

China imported more rice than it exported only three times in the past 44 years, said David Dawe, an agro-economist at the International Rice Research Institute in Manila. World prices rose $160 a metric ton when its import-export balances last tipped in 1995 and 1996.

China’s future need for rice is “the million-dollar question,” Dawe said. “It affects everybody who’s importing and exporting rice around the world.”

Thailand’s economy may expand at least 7 percent this year from 6.7 percent in 2003 on sales of rice and other agricultural exports and consumer spending, the government estimates.

Rice, a form of grass, is a staple food for about half the world’s population, according to the United Nations Food and Agriculture Organization, which declared 2004 the International Year of Rice.

“The effects of even small price fluctuations on the welfare of producers and consumers, especially on the poor, can have political repercussions,” said Dawe, of the rice institute.

The shortage in China, where the economy grew 9.1 percent last year, occurred for the same reasons as in 1995 to 1996, Dawe said. “Rapid economic growth is leading to more jobs outside agriculture and, thus, labor shortages in agriculture,” he said.

Drought and power shortages that affected irrigation damaged some crops last year, the state-run China Daily newspaper reported in July. In November, the government boosted enforcement of rules that restrict conversion of farmland for other uses, the newspaper reported.

The rice harvest will reach a 12-year low in the year ending September 30, the government estimates. Rice stores may fall to 85 million tons by the end of this year, down 27 percent from 2003 and the lowest in more than 10 years, according to Chen Shuwei, an analyst at Beijing Orient Agribusiness Consultants Co., an agriculture ministry affiliate.

“The government is replacing guaranteed grain purchasing with subsidies and telling farmers they can sell for whatever price they can get,” Chen said.

In April, China’s Finance Ministry announced $114 million in “urgent subsidies” to rice farmers to buy seeds and fertilizer.

It cut farm taxes and directed agricultural credit cooperatives to lend more.

“After 1995 to 1996, rice area increased again in China, but it is not clear that will happen this time,” said Dawe. Rice prices in China have risen 70 percent, according to Ascot’s Ciss.