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Surging rice price, domestic consumers and exports




  • riceRice prices continue to rise with non-basmati varieties witnessing the highest increase. The situation makes the task of the new government extremely difficult in controlling food inflation. As the common man continues to be burdened by high fuel to food costs, curbs on rice export may be seen as the easiest option to improve supply and control the prices.

    But, on the other hand, the poor farmers from the rice-growing belts, would be the worst affected by any rice export curb or ban. Any such step might bring short-term relief but will hurt the long-term growth prospects of the agriculture sector.

    Moreover, it will be resented by 70 per cent of the rural population which is directly or indirectly depends on its livelihood to agriculture. Farmers already are frustrated by low procurement price of wheat, now fixed at Rs625 per 40kg. The farmers’ associations across Punjab and Sindh have disapproved the latest procurement price which is far below the international market rates, while prices of inputs (DAP and urea) are closely linked with global prices.

    With the wheat price standoff with farmers, curb on rice exports would simply add insult to injury as prices paid to farmers for rice paddy will definitely fall.Further, it can be argued that the rural population is not affected by rising food prices as it keeps part of the produce for its their own yearly consumption..

    But still, what is the solution for the high food bill of the urbanites? Is there any possibility of stabilising food prices especially prices of rice? The answer lies in a multi-faceted approach of short-term, medium-term and long-term measures that will assure stability of rice prices and growth in foreign exchange earnings through rice export.

    Short-term measures: Like wheat, a lot of our rice finds its way to Afghanistan through our porous borders. This rice smuggled across the border through semi-barter trading goes undocumented and does not bring any foreign exchange or any income tax earnings. The first priority of the government should be to ensure that rice is not smuggled into Afghanistan; instead it is exported via official channels.

    The table shows that rice production dipped by only two per cent last year. But because of increased prices, our volume of exports fell by 15.2 per cent. Somehow, our local consumption increased by a staggering 24.2 per cent. These large swings in local consumption are not increases in domestic consumption but represent cross-border smuggling. The notion that local prices of rice have increased due to increased exports is not right. If smuggling is effectively checked, the domestic availability will increase and local prices will stabilise.

    Financing offered to industries/businesses other than rice is mis-used for speculative rice buying.. Many businesses that had nothing to do with rice, for instance textiles and fertiliser dealers, were buying rice with banking facilities extended to them for other purposes. The State Bank should ensure that bank credit was not directed towards speculative trading.

    Within the rice value chain, the SBP should implement specific lending policies for rice huskers, rice brokers, and rice middle-men that ensure a smooth rice trade without any hoarding/price manipulation by middlemen. For this purpose, margin for pledge should be increased and it should be required that banking facilities are revolved/settled within 90 days by rice huskers and middlemen.

    Medium-term measures: According to International Rice Research Institute (IRRI): “Post-harvest grain losses across all Asian countries have been estimated at 10–15 per cent and, when combined with the loss of quality, the potential loss in value is between 25–50 per cent”. The same is the case in Pakistan as a significant portion of the rice crop is destroyed and wasted due to improper handling and lack of storage facilities and logistics.

    If this wastage is reduced, the rice production will increase and prices stabilised. The widespread use of automatic harvesters makes the process of paddy harvesting quicker, but at the same time the moisture content is much higher than in the past. Paddy with moisture levels of over 20 – 25 per cent is very likely to develop fungus and aflatoxin if not dried quickly and properly.

    Unfortunately rice dryers (a common sight in most rice-growing nations) are rarely seen in Pakistan as most husking units employ the traditional sun-drying method which leaves rice at the mercy of rain and fog during the period of harvest.

    Additionally, after paddy is dried, it is stacked in jute bags out in the open due to limited warehousing instead of being stored in grain silos. If the government assists rice farmers in acquiring husking units, it will improve rice handling infra-structure on favourable terms, and will go a long way in reducing wastage and stabilising prices in the medium-term.

    Long-term measures: As part of the overall agricultural strategy, the future of rice cultivation should also be carefully chalked out. Like other agricultural produce, yield of rice per hectare is also below that of regional countries — India, Thailand, Vietnam and China. Effort needs to be made through rice research institutions to introduce high-yielding varieties. There is also need to bring more land under cultivation by improving water and irrigation management systems. And finally there is need to increase research and technical expertise of farmers with reference to rice cultivation.

    With a broad picture in mind, the government may be successful in stabilising rice prices and increasing foreign exchange earnings instead of a knee-jerk reaction of curbing rice exports. To quote experts: “Banning exports does nothing to encourage farmers to increase supply or improve productivity”. A ban only exacerbates the price spiral problems. It does not solve it.

    The writer is Director of Matco Rice Processing (Pvt) Limited.

    Courtesy: The DAWN

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