The End of Cheap Rice

Developments affecting the

Cambodian rice market –

an overview

prepared by Winfried Scheewe, DED Marketing Advisor to CEDAC

Revised 03 May 2008

•

What happened?

• Soaring rice prices are hurting especially the poor

• Staple food for more than half the earth's population, causing political unrest

• Prices for wheat and corn also up

• Supply bottlenecks• Sometimes draconian

moves by governments to protect domestic stocks

Price development in Phnom Penh(02 January to 30 April 2008)

Rice: Whole Sale Prices in Phnom Penh Markets (Prices in US$ per 50 kg bag)

0

10

20

30

40

50

60

07 0

121

01

05 0

2

22 0

203

03

16 0

324

03

02 0

411

04

30 0

4

Date

US

$ p

er

50

kg

ba

g

Phkar Malis

Phkar Khney

Neang Khon

Neang Mihn

Note: On 26 March the Cambodian government issued an export ban for rice.

Where does the paddy go?Destination of Camodia's Paddy (2007/08

6,700,000 tons (Estimates)

Informal export (64.6%) , 4,330,400

Domestic market (16.2%), 1,082,600

Kept by farmers (19.2%) , 1,287,000

Based on estimates by MAF, CEDAC and World Bank

The informal exports cause loses to the economy and could pose a threat to food security. There is a lack of capital for stocks and storage facilities.

Consumption of Milled Rice*

* CEDAC estimates

Rice world market facts• Annual production:

645 million tons of paddy (=430 million tons in milled rice)

• 114 producing countries in 2007

• For 3 billion-plus people rice is the basic staple

• Seven (7) percent of the rice production worldwide is traded internationally (= 30 million tons)(17 percent of the global wheat production is traded internationally.)

• Changes in supply and demand have drastic effects on the rice prices in most countries, affecting the lives of billons.

Major exporting countries (2007)

If Cambodia’s rice exports would be properly accounted for, it could rank next to China.

Major importing countries (2007)

Many countries import rice, often relatively small quantities. Currently the Philippines is the biggest importer.

Consumption exceeds production

World Rice Production and Consumption

-50.0

100.0150.0200.0250.0300.0350.0400.0450.0

Mil

lio

n m

etri

c to

ns

Production

Consumption

Ending Stocks

Worldwide, during several years, consumption exceeded the production. Consequently the available rice (here - year-end stocks) declined.

Declining stocks

Rice: Ending Stocks (World)-Good for how many days?

020406080

100120140160

1978

/79

1983

/84

1988

/89

1993

/94

1998

/99

2003

/04

2007

/08

Mill

ion

to

ns

/No

. of

Da

ys

Ending stocks

Days

Stocks worldwide are currently on the lowest level since 25 years and are expected to fall below 70 million tons. When stocks were at a low point, the ending stocks were good for only 79 days.

Bangkok and Phnom Penh prices

Whole Sale Prices in Bangkok and Phnom Penh 02 January - 30 April 2008

0.00

10.00

20.00

30.00

40.00

50.00

60.00

02 01

15 01

30 0113 02

27 0212 03

26 0302 04

11 0430 04

US

$ p

er 5

0 kg

bag

Thai Jasmine B (Bangkok)

Thai White B - Export grade (Bangkok)

Cam. Phkar Malis (PhnomPenh)

Cam Phkar Khney (PhnomPenh)

Trends of production and prices (Worldwide 1961 - 2004)

Rice export prices are adjusted for inflation and expressed in US dollar (exchange rates of 2004). (Data: USDA, FAO and IMF)

Other grains

• Prices for rice, wheat and corn are related

• Wheat prices also increased since 2007

• Significant share of the US corn harvest used for biofuel

Wheat and corn prices likewise increased

Another green revolution - or sustainable livelihoods?

• IRRI and others proclaim the need for another Green Revolution. raise funds for research

• Companies promote hybrid and GMO seeds

• Ignoring farmers’ innovations such as the Systematic Rice Intensification (SRI) and the MASIPAG rice breeding program

Enhancing food security

• Support farmers to enhance their skills and capacity to cope with the challenges

• Capital (soft loans) for investments in rice stocks, warehouses and mills

• Farmer’s groups can be enabled to keep and store paddy for several months.

• Farmers’ organizations and networks need to monitor prices, and to

• provide their communities with relevant market information

Utilizing export markets

• Cambodia produces a considerable surplus of rice

• Production can be increased, esp. fragrant rice• Foster partnerships with rice traders abroad• Challenges: capital, procurement, grain quality• Need to ban GMO rice seeds

Thank you!