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RICE FACTSRice crisis:THE AFTERMATHWhat has happened, what has changed, and what are the challenges ahead?by Samarendu MohantyHead, IRRI Social Sciences DivisionCompared with the prices ofother cereals such as wheatand maize, rice prices wererelatively subdued for muchof 2007. In late 2007, however, pricesbegan to zoom upward to levelsnot witnessed in more than threedecades. Between November 2007and May 2008, export prices almosttripled (Figure 1). Since then, priceshave softened but remain high.Several factors such as adverseweather in key producing countries,high oil prices, and pro-ethanolpolicies combined with speculativetrading and government tradeinterventions to control domesticprices contributed to the recent spike.Despite media and publicattention to the recent price surge,a steady increase in rice prices from2000 went largely unnoticed. From2001 to 2007, rice prices nearlydoubled primarily because of adrawing down of stocks to meet thedeficit arising out of deceleration$ per ton10008006004002000Aug05Oct05Thai 100% Grade BWheatMaizeSoybeansDec05Feb06Apr06Jun06Aug06Oct06Fig. 1. Monthly crop prices.Data source: various issues of Crop Outlook Reports, USDA.Dec06Datein yield growth (Figure 2). Currentglobal rice stocks have declinedfrom a 135-day supply to a 70-day supply in the last 7 years—a44% drop from 147 million tons in2001 to 82 million tons in 2008.Rice crisis aftermathThe 2008-09 rice market is likelyto remain tight even with projectedrecord global production of 432million tons 1 (milled rice)—a 1%increase over last year’s 428 milliontons. Production in 2007-08, nearly2% higher than the 2006-07 level of420 million tons, was also a record.$ per ton600500Stock-to-use ratioThai 100% Grade B400300200100097/98 99/00 01/02 03/04 05/06 07/08YearsFig. 2. Rice price and stock-to-use ratio.Data source: Production, Supply, and Distribution Database andRice Outlook Report, USDA.Feb07Apr07Jun07Aug07Oct07Dec07Feb08Apr08Jun08The projected increase in globalproduction is based primarilyon increased area with averageprojected yield nearly unchangedfrom the previous year. Accordingto the United States Departmentof Agriculture (USDA), rice areais projected to increase by almost1 million hectares from 154.4million hectares in 2007-08 to155.3 million hectares in 2008-09. India will account for morethan half of the total increase.Despite higher prices, riceconsumption is expected to remainstrong because of substitutionaway from more expensive food%403020100such as fruits, vegetables,and livestock products.Global consumption in2008-09 is projected to bearound 426 million tons,an increase of around 1%from the previous year.After reaching a recordlow of 73 million tons in2004-05, global rice stockshave been steadily rising andare projected to reach 82 milliontons in 2008-09, compared with78.5 million tons in 2007-08.Despite expectations that globalstocks will continue to increase inthe coming year, prices are likelyto remain high partly in responseto export restrictions imposedby key rice-producing countries.Making matters worse, alreadydepleted stocks in the U.S.—oneof the few countries that resistedimposing export restrictions duringthe recent crisis—are projected todecline further, further destabilizingthe market in the coming months.However, as the bulk of the1Production, Supply, and Distribution (PSD) database published by the United States Department of Agriculture (USDA).40 Rice Today October-December 2008RT7-4 (p24-44)_FA.indd 4010/9/2008 8:28:42 AM