|10 May 2012 (Thursday)
|S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Nanyang Avenue, Block S3.1, Level B3 (New Wing), Lecture Theatre.
|Dr Samarendu Mohanty (Program 5 Leader and Head of the Social Sciences Division, International Rice Research Institute (IRRI), Philippines)
|Dr J. Jackson Ewing (Research Fellow, RSIS Centre for Non-Traditional Security (NTS) Studies)
In this era of lower buffer stocks and increasing frequency of extreme weather and emerging pest outbreaks, timely and accurate information will play a critical role in influencing the food security of millions of poor people in the developing world. The International Rice Research Institute’s (IRRI) information gateway initiative is aimed at contributing to efforts to obtain such data.
This seminar discussed the food security implications of IRRI’s information gateway initiative which began in late 2010 with active support from research partners around the world.
It is clear that policy attention on rice is vital for the better than 3 billion consumers for whom it is a staple food. Movements in the price of rice can move people in and out of poverty, whether through systemic volatility or price hikes.
Following the food crisis of 2007–2008, there was a policy shift towards greater control of the price of rice. Many governments saw the political importance of keeping rice affordable and elected not to rely on international markets as heavily. They subsequently instituted measures to increase domestic rice production.
The problem is that the measures are unsustainable, examples being minimum prices for farmers, incentives for farmers to grow rice when it is not to the state’s or farmers’ economic advantage, and not allowing farmers to diversify their crops away from rice. In terms of trade, the 1990s and early 2000s saw greater private sector involvement than exists today. It could be observed that, in recent years, governments have re-established a strong presence in the rice market.
Another measure, the Thai rice mortgage scheme, has doubled the market price for rice. This has created a challenge for exporters. Demand has fallen for Thai rice because of the price rise, resulting in a larger than expected surplus in the Thai market.
Looking ahead, there are several factors in the rice sector that need to be taken into account. Yield growth is slowing, and the high expansion of land area dedicated to rice cannot be sustained. Complicating the situation are the conflicting predictions about consumption patterns, with some reports suggesting that even with population growth the world will consume half the amount of rice today, while other models predict growth of up to three times current consumption.
Amidst the uncertainty and risk in the rice sector, the IRRI is focusing on three areas of work: closing yield gaps, raising the upper ceiling in rice yields, and market stabilisation through the Global Rice Information Gateway (GRIC). Working towards the first two objectives, IRRI’s rice researchers are developing stress-tolerant varieties to cope with extreme climates and converting them to behave like other, more resilient crops. Some varieties look set to produce 25–50 per cent higher yields, have greater efficiency in the use of nitrogen, and use less water.
The IRRI is optimistic that the GRIC will work towards stabilising markets through its major components: a rice monitoring and forecasting platform; the Global Rice Model that projects supply and demand; and a rice database.
The rice monitoring and forecasting platform is being developed by combining information gathering (through field work and using modern techniques such as satellite-based remote sensing) with weather and crop modelling, and econometric analyses. The IRRI has developed software to map such information as planting dates and leaf area index. This technology allows for updates on production, and information on potential damage within 30–45 days after transplanting. The availability of reliable, real-time estimates on rice production will enable policymakers to design mitigation mechanisms for farmers and to make informed decisions on whether or not to impose trade restrictions and measures to prevent excessive stockpiling to secure the domestic food supply.
The Global Rice Model is a state-of-the-art structural econometric model describing the behaviour of the world rice market and its linkages with other agricultural and non-agricultural inputs and products. The model is partial equilibrium in nature, and includes the major rice-producing, rice-consuming and rice-trading countries. It is capable of generating short- to medium-term baseline projections of production, consumption, trade and prices of rice under a given set of macro projections and policy regimes. More importantly, the model can be used for analysing a variety of subjects related to domestic and trade policies, marketing, and food security.
The final component of the information gateway is a comprehensive database system or social science genebank that includes national, subnational, farm and household survey data, World Rice Statistics and geographic information system (GIS) data.
The IRRI will conduct analyses to determine the GRIC’s impact on trade, policy, and ultimately, poverty, as well as the effectiveness of its improved rice varieties and the usage of these by farmers.
The discussion elicited several elaborations on the factors surrounding the production, consumption and trade of rice. First, supply typically affects the price more than demand, although consumption is difficult to measure long term because it is generally reactive to availability. Therefore, consumption is measured using availability figures. Second, despite the wide diversity in rice varieties, rice can broadly be categorised into two or three main varieties. These varieties move more or less together, unless government intervention overrides this. Third, the market margin is captured in the price of rice and unlike other commodities, fluctuations in price move quickly up and down the supply chain. Fourth, the information that becomes available as a result of monitoring rice itself does not directly affect the price of rice so much as supply factors and the market reaction to the information.
It was also argued that Malaysia and the Philippines should not pursue a strategy of self-sufficiency in rice, as the global rice trade is already small. Making trade more thin would make it more difficult for these countries to ensure rice supply during a crisis, particularly in the case of localised events. These countries should keep production intact and viable, but not at the cost of agricultural and economic distortion. Furthermore, subsidies to farmers are unsustainable. Subsidies such as those for irrigation allow for increases in production fairly easily, but they are not a viable long-term solution for maintaining the higher levels of production.
Initial testing in the Philippines suggests that the IRRI’s new monitoring technology is more accurate than government data on rice availability. The two sets of estimates differ, but the IRRI’s results match that of field findings.
In terms of tools to stabilise the rice market, the benefits of a rice futures market would likely outweigh the risks associated with outside speculation. A futures contract allows farmers to sell at a set price, thus moving risk away from the farmers and onto speculators. However, there is the possibility that hedge funds could manipulate the market by staying in long positions and creating artificial demand. There are alternatives to a futures market. For example, the information provided by Platts on oil in the US allows for a transparent price platform, with regional players taking positions. Trading a rice index could be an option but trade restrictions would be a barrier.
About the speaker:
Samarendu Mohanty is the Program 5 Leader and Head of the Social Sciences Division at the International Rice Research Institute (IRRI) based in Los Banos, Laguna, Philippines. Prior to joining IRRI in 2008, he was Associate Professor and Associate Director of the Cotton Economics Research Institute in the Department of Agricultural and Applied Economics, Texas Tech University from 2000–2008. He also worked as a scientist at the Food and Agricultural Policy Research Institute, Iowa State University, from 1994 to 2000.
He received his M.S. and PhD in Agricultural Economics from the University of Nebraska-Lincoln in 1995 and a B.S. in Agricultural Marketing and Cooperation from the University of Agricultural Sciences, Bangalore, India in 1989. He has received several awards and recognition for his teaching and research including recognition from the Western Agricultural Economics Association and the University of Nebraska-Lincoln for his contribution to agricultural, resource and environmental economics in the Western States.
Please click here for the presentation slides.