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400
350
300
250
200
US$ t –1 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
150
100
50
White broken rice, Thai A1
Super, f.o.b. Bangkok
White rice, Thai 100% B
second grade, f.o.b. Bangkok
0
1983
Year
Fig. 5. Evolution of Thailand’s (main rice exporter) rice price, 1983-2004. Source: FAO Commodities
and Trade Division (September 2004), World Rice Statistics, IRRI (2004).
functions, to conduct public-service activities and to conduct
business as a commercial organization. Under the former function,
BULOG still distributes “Rice for the Poor” (Raskin) and
maintains national stock reserves to counter food shortages
during emergencies. As a commercial organization, BULOG
can enter into trading activities as a profit-making organization.
The role of governments in the international rice trade
has also diminished, as has the influence of large trading companies.
Today, numerous smaller trading companies are engaged
in the international trade of rice, which has increased
competition and eroded trading margins. However, the degree
and type of policy changes that have occurred in recent years
vary greatly from country to country. We consider two examples:
Vietnam and India.
Vietnam’s rice market is characterized by a high level of
commercialization and a large role of the private sector in the
production and marketing stages. The private sector plays a
key role in procuring rice from farmers, supplying rice to exporters,
and distributing rice within the country. At the same
time, however, the private sector is highly underdeveloped and
regionally imbalanced (Golleti and Minot 1997). Until recently,
all rice exports from Vietnam were conducted by SOEs, but
over the last few years private firms have gradually been allowed
to export rice. Although SOEs buy from farmers, the
importance of these transactions is not sufficient for SOEs to
stabilize producer prices, which is considered one of the main
functions of these organizations. Thus, although SOEs still play
an important role in Vietnam’s international trade, gradual liberalization
is occurring (Tolentino and Bruce 2003, Dawe
2004).
In India, the government still intervenes in trade transactions.
The Food Corporation of India is one of the largest
organizations procuring food grains on behalf of the government
of India. One of the main roles of this organization is to
buy and transport rice from surplus areas to deficit areas, under
the Public Distribution System, to ensure food for the poor
and to stabilize prices (Nigam 2004). Nevertheless, although
the private sector negotiates and handles the export of rice,
the government still makes key decisions that determine the
quantity of rice exported (Dawe 2004).
Developments in and determinants
of the price of rice
The world price for rice has shown a declining trend over the
past 50 years. After adjusting for inflation, world rice prices
today are 77% lower than the average from 1950 to 1981. The
main reason for the decline in prices is the Green Revolution,
which led to an increase in yields and a decrease in unit production
costs, and consequently to an increase in worldwide
supply (Dawe 2004). World prices for other grains have also
declined in real terms, but to a lesser extent than has occurred
for rice. Rice prices continue to fluctuate substantially, as can
be seen in the plot of rice prices for Thailand over the period
1983-2004 (Fig. 5).
The price of rice fluctuates significantly and is sensitive
to variations in supply and demand. The main cause for this is
the small amount of rice traded internationally; less than 7%
of the world’s total rice production is traded. Furthermore, six
countries (Thailand, Vietnam, China, the United States, Pakistan,
and India) supply 85% of the rice that is traded. This
concentration in world rice markets implies that changes in
production or consumption in major rice-trading countries have
a strong effect on world prices. In recent years, there has been
a diversification of world importers and exporters that could
further stabilize rice prices. Before the Green Revolution, Asia
(excluding the Middle East) accounted for 64% of world rice
imports, and an identical share of world exports. Today, a more
diversified group of countries accounts for rice imports.
14 Rice is life: scientific perspectives for the 21st century