Sustainability of rice in the global food system - IRRI books

Table 7. Costs of production and farm-gate prices of paddy rice in selected countries, 1987-89.
cost of Farm-gate Yield Share of labor
Country production price (t ha -1 ) in total cost
(US$ t -1 ) (US$ t -1 )
(%)
Japan 1,987 1,730 6.5 28
South Korea 939 957 6.6 17
United States 195 167 6.3 5
Vietnam 100 130 4.6 17
Thailand 120 141 1.8 35
Bangladesh 138 180 2.7 32
Sources: FAO 1992 and IRRI 1995.
a point. Land prices remain high and increase over time because of extreme population
pressure, growing demand for land for housing and industrial purposes, and restrictions
on the accumulation of landholdings because of ceilings on ownership in
land reform legislation in many countries. In South Korea, rural wage rates and land
prices increased at 18% yr - 1 during 1970-90, when machinery and fertilizer prices
increased at 7% yr -1 (Park 1993).
As the cost of rice cultivation continued to increase because of the rising opportunity
cost of labor and land, governments kept raising rice prices and increasing
farm subsidies to maintain a balance between rural and urban household incomes.
Protecting the domestic rice industry encourages high-cost domestic production. In
the late 1980s, the cost of producing rice in Japan was about 17 times higher than in
Thailand and Vietnam and about 10 times higher than in the United States (Table 7).
That difference shifts the comparative advantage of rice production to low-income
countries.
Implementation of the GATT Uruguay Round agreements may further dampen
incentives for rice production, particularly in middle- and high-income countries
(Pingali 1995). Those countries will not be able to compete with low-income countries,
where the wage rate and opportunity cost of family labor are low, or with large
countries with land surpluses in the developed world (such as Australia, the United
States, and Italy) that reap economies of scale because of large farms. If domestic
markets are opened for competition, the price of rice will decline substantially, thus
providing incentives to consumers to buy imported food staples and forcing farmers
to abandon rice cultivation in favor of more lucrative economic activities.
An important way to gain competitive strength in the face of the liberalization of
rice trade is to consolidate tiny holdings into large-scale farms as rural households
migrate to urban areas and leave their land behind. Precision farming on large-scale
holdings, as currently practiced in the developed world, and the vertical integration of
the rice industry (production, processing, and marketing managed by the same farm)
may contribute to a more efficient use of large-scale machinery and a large reduction
in the number of part-time farmers who are now tied up in the supervision of numerous
tiny farms. The main constraint to consolidating holdings in Asia, however, is the
30 Hossain