Massive global supply will prevent rice prices from soaring even as
Thailand continues its paddy pledging and India restricts its exports, says the
Asian Development bank.
Lourdes Adriano, lead agriculture
specialist, called on Thailand to consider its global responsibility as a major
rice exporter when contemplating the idea of forming a rice cartel.
The Thai government has
accumulated 10 million tonnes of paddy from its pledging programme this year,
causing storage problems as warehouses fill to the brim.
Commerce Ministry employees have
floated the idea of setting up a rice cartel, but Ms Adriano said such a scheme
is impractical as countries are likely to compete with one another and the
supply of rice is uncontrolled.
''Asean should step in if any
countries consider pursuing a rice cartel. This is not a regional issue but a
global responsibility. A cartel will not benefit any exporters, nor any other
countries in the world. It's a zero-sum game,'' she said through a video
conference.
Ms Adriano said the Thai
government's rice pledging programme not only incurred a fiscal cost from the
massive subsidies, but also threatened to disrupt the thin supply volume in the
world market.
''A better idea is to facilitate
trade and export to needy countries, investing in infrastructure that reduces
the cost of marketing and the post-harvest process, as well as R&D to cope
with the effects of climate change,'' she said.
The Thai government might
consider contributing the paddy to the stockpile of the Asean+3 (including
China, South Korea and Japan) reserve pool, as the existing amount of 750,000
tonnes could barely meet demand in case of a supply disruption, she added. ADB
estimates 1.2 million tonnes is a suitable reserve size.
Ms Adriano said a high global
stockpile will prevent rice price increases in the world market even if Thai
exports were squeezed by the pledging scheme and India continued to ban
exports.
Rice prices are unlikely to fall
as increasing production cost from fertilisers, oil and water dampen incentives
for Asian farmers to produce more rice, although the supply in Myanmar is
expected to rise, she said.
Asia is an important price setter
for rice, accounting for more than half of supply and demand.
India has accumulated a huge
stockpile since 2011, after lifting the export ban it implemented from 2008-10.
The Thai government's pledging
scheme reduced the supply of rice in the export market, as exporters would not
buy the grain at the artificially high prices set by the government.
India lifting its export ban
prevented a steeper surge in rice prices in 2011 and this year, along with
supply from Vietnam and Pakistan.
Ms Adriano said the Thai
government should consider a cash transfer to compensate for the gap between
its selling price of rice and the market price.
Bui Giap Minh, another ADB
specialist in the agricultural sector, said paddy from Cambodia is shipped to
Thailand and Vietnam for milling because it is considered low-quality and
unsellable on the world market, and the country lacks post-harvesting systems.
This practice also cushions against further surges in rice prices.
Crop prices overall are expected
to increase this year, mainly because of gains in corn, soybeans and wheat as a
result of drought in the US.
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