The End of Cheap Rice: A call for social safety nets?

Recently, the Overseas Development Institution (ODI)released a report on the situation of rice prices in the world market. Since 2000, rice prices have more than doubled and have risen by almost 120% in real terms. This steady increase in prices was caused by a myriad of factors. Policies by major exporting and importing countries contributed but the fundamental drivers are the increased cost of production inputs such as fertiliser, diesel and labour. It was highlighted in the report that the increase in rural wages was a crucial factor given that an estimated 1.3 billion of Asia’s poor and vulnerable people depended on rural labour for their livelihoods. In India, the rural labour force continues to grow 1.5 per cent, equivalent to 4 million workers per year. Similarly, Bangladesh experiences an increase of 1 million rural workers each year. 

In Asia, two of the largest producers of rice in the region – India and Thailand – have a combined stock of at least 48 million tonnes. In the case of Thailand, exporters are bearing the cost since their rice is more expensive in the world market. Similarly, consumers are affected by its increasing price. On the other hand, India recently implemented its Food Security Bill that seeks to decrease the number of its hungry and malnourished citizens. To date, it is the largest food assistance scheme implemented in terms of costs. The Thai and Indian cases are clear examples of the increasing costs in producing rise. With this, farmers may opt to produce other crops that are more cost efficient and profitable at the same time. Another implication of this situation is the migration of rural workers to areas or sectors where there are better paid jobs. This will further exacerbate the phenomenon of “greying farmers” in the region wherein there can be a possible labour shortage in agriculture in the future if the trend persists.

The situation is a challenge to the food security of Asian countries. Rice is an indispensable crop in the region since it is the main source of caloric intake for the region’s population. Given that the region’s population is increasing alongside with other demand drivers such as rapid urbanisation and improving incomes, governments need to think carefully of the policies they must implement to address their population’s food security concerns. The trend in the application of social safety nets (e.g. food aid, direct transfers) is a way to address this concern but requires efficient institutions and processes to support their implementation. On the other hand, social safety nets are risky in the sense that they are populist policies and are difficult to reverse in the future. In this case, governments must be clear about their policy objectives and the need for a strict timeline for implementation. The success of implementing such policies requires a huge investment on their part and on their capacity to make them work and benefit a wide range of stakeholders.