High rice prices no windfall for many Asian farmers
TONG JAI DAI, Laos: It should be happy times in the radiant green rice paddies that Pomchan Luanguanna has spent more than three decades tilling: the price of his crop is soaring faster and higher than anyone can remember, and local newspapers are comparing rice, once a relatively cheap and neglected commodity, to gold sprouting from the black soil.
But Pomchan, like many small farmers across Asia, is not rejoicing. His extended family eats more or less all the rice he harvests from his small plot here. His neighbors are worse off: they put down their tools when the price of gasoline, fertilizer and pesticides soared. "Their fields are empty," Pomchan said.
In the sprawling, high-tech farms of the United States, the oil fields of Saudi Arabia and the coal mines of Australia, farmers, drillers and miners are rubbing their hands in anticipation of a continued windfall from the boom in commodity prices.
But for many rice farmers in Asia the commodity they produce ends up as food in their stomachs, not cash in their bank accounts.
"The assumption is that all farmers are better off when prices go up," said Robert Zeigler, director general of the International Rice Research Institute in the Philippines. "The problem is that a large proportion of rice producers in the world are actually net rice buyers - they produce less than their actual needs."
Rice prices have been creeping upward since the beginning of this decade, but it was not until February that they spiked sharply. Thai B grade rice, a widely traded variety, sold for $546 per ton in March, up 68 percent from a year earlier.
"Nobody has ever seen such a jump in the price of rice, certainly not in my lifetime, and that's a long time," said Kwanchai Gomez, the executive director of the Thai Rice Foundation, a research center financed by the Thai royal family. She is 68 years old.
Experts say rice prices are rising because of a mix of irrational panic, weather problems - typhoons in the Philippines, a cyclone in Bangladesh, flooding in Indonesia and Vietnam - and an overall reduction in the land dedicated to rice farming. There are also strong suspicions of hoarding, something that the Thai commerce minister recently encouraged before reversing himself.
Thailand, which is by far the world's largest rice exporter, has become a focal point of the global rice market as other traditional exporting countries like Vietnam, India and Egypt have halted or put restrictions on their exports in recent weeks to ensure sufficient domestic supplies.
But it is a measure of the relatively weak position of rice farmers that even in Thailand the majority of farmers have not yet benefited from the increase in prices.
Their farms are generally bigger and more modern than ones found in Laos and other remote parts of Asia, but their productivity is low, and perhaps most important, they have no way of storing their own rice. Most of them sell their crop immediately after the main harvest in November, when supply is ample and prices are usually lowest. The price of Thai white rice is 58 percent higher now than it was in November.
"Are most of the farmers benefiting from this? I would say no," said Kwanchai. "This price rise is a problem for everyone because no one was prepared."
To be sure, there are winners in the rice business these days and there are likely to be more if the high prices hold or rise. Commercial farmers who have access to irrigation, which in Thailand make up 25 percent of the total, can harvest as many as four times a year and thus will reap a windfall in May when their next crop is due.
The biggest winners are the millers and packers because they are able to hold onto their rice and sell at higher prices.
Yet it is striking how many people in the rice business in Thailand are complaining as the price of rice soars.
Korbsook Iamsuri, the head of Kamolkij, a rice exporting company that controls about 5 percent of the Thai export market, said the suddenness of the upswing caused some exporters to lose tens of thousands of dollars.
Rice is usually delivered about two months after a contract is signed, Korbsook said, and some exporters gambled that prices would decline or hold steady, as happened in previous years. Instead, they were stuck delivering rice that cost them as much as $300 per ton more than what they contracted to sell for. Some have defaulted on contracts because of a scarcity in the market.
"It seems impossible to get the rice now," Korbsook said.
Many consumers around the globe rely on Thai rice, including African and Middle Eastern countries. Hong Kong imports 90 percent of its rice from Thailand.
For wealthy and middle class consumers, higher rice prices are largely a nuisance. But if prices move higher it could be a disaster for the poor in Asia, who spend most of their disposable income on food - and for whom rice is indispensable. In the Thai language a common traditional greeting is "have you eaten rice yet?"
The UN World Food Program, which distributes food to some of the poorest people in Asia, including in Myanmar and North Korea, said it had a $500 million shortfall in its budget because of rising cereal prices as well as sharply increased transportation costs.
The Food and Agricultural Organization, a United Nations agency, predicts that prices will stabilize as Brazil, Uruguay, Bangladesh, India, Indonesia and Vietnam harvest their crops in the coming weeks and months.
The upside to the rice crisis, experts say, is that consumers and governments will no longer take rice for granted.
"To me it's a good thing, it startles people," Kwanchai said. "It makes people realize that rice is so important."
She hopes the spike in price will spur rice farmers to modernize, become more financially savvy and raise their productivity. Thai farmers harvest an average of 2.63 tons per hectare, or about a ton per acre, compared with 6.22 tons per hectare in China, 4.22 in Indonesia, 3.03 in India and 7.55 in the United States. These yields are a measure not only of efficiency but reflect the strains of rice produced.
Yields for jasmine rice in Thailand, for example, are much lower than plain white rice, but the fragrant rice fetches double or triple on world markets.
Zeigler, of the International Rice Research Institute, said the focus on rice could speed up the adoption of some genetically modified strains that require less water or are flood resistant. It may also spur governments to improve their irrigation systems.
"We should have taken action years ago," Zeigler said. "We've been looking at reduced investment in research and infrastructure maintenance and that sort of thing for 15 years now. The chickens are coming home to roost."
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