Declining stocks, rising demand from China to push rice prices higher

Declining world stocks along with the anticipated surge in imports of emerging economic super power China will make rice more expensive for net importers like the Philippines.

Rice experts at the 5th International Rice Genetics Symposium noted that while world rice production has been keeping pace with the growth in population, there is increasing supply pressures from China and other major-rice consumers like India.

Duncan Macintosh, spokesperson of the International Rice Research Institute (IRRI), said the entry of China in the rice market in the last three years has considerably raised prices of rice in the world market, and the trend is likely to be sustained.

He noted that in 2004, China imported 6.9 percent of its domestic requirement and this has resulted in a 40-percent increase in world prices of the staple.

"China is a major player in the market and it has been sucking up surplus supply in the world market. As a result, we can say that China’s influence in the rice market will have a far wider impact than the rise in oil prices," noted Macintosh.

Last year, Thai rice prices which normally serve as a benchmark for rice prices in the world market, averaged $260 per metric ton. This year Thai rice is averaging $290 per MT and traders said this is likely to hit the $300 per MT level.

China which is already a major rice producer, still faces production shortfalls as the emerging economic power house accelerates its urban and economic development. Over the years, domestic production has not kept pace with a growing population as the rapid industrialization activities have prompted the conversion of traditional rice lands into economic zones and industrial parks. On the other hand, the Chinese government has also been developing more natural parks as part of its environment program. At the same time, the government also eased rice planting restrictions on farmers, thus, many have abandoned rice farming in favor of more high-yielding and high-value commercial crops.

These developments will have far-reaching implications for rice net importers like the Philippines.

In recent years, the government has been shelling out P13 billion to P16 billion for its rice imports. With the leap in world prices of rice last year and this year, rice imports this year is projected to reach P28.17 billion.

This is significantly higher than the Department of Agriculture’s proposed 2005 budget of P17.5 billion.