Rice Stocks and Trade Policy in Asia:
A Role for International Stock Arrangements?
Paul A. DoroshInternational Food Policy Research Institute
Agricultural Transformation in Asia: Policy Options for Food and Nutrition SecuritySiem Reap, CambodiaSeptember 24, 2013
Thanks to Abigail Childs for research support on this work.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Plan of Presentation
• International Rice Reserves in Asia
• Bangladesh Rice Trade and Stocks• 1998 Flood and Rice Imports• India’s Export Ban in 2008 and Implications for National
Stocks
• ASEAN Plus Three Emergency Rice Reserve• Thailand’s 2011 Stock Buildup and World Prices
• Concluding Observations
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
International Rice Reserves in Asia
Name Stocks GoalsSAARC: South Asian Association for Regional Cooperation (1987-present)
Members contribute a prescribed amount every year, grain is held within country No explicit goals
Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Stocks are earmarked for reserve
AERR: ASEAN Emergency Rice Reserve (1979-2004) Voluntary contribution of stocks by
country with the end-goal of a regional stockpile
• Strengthen food security in the region• Enhance international competitiveness of ASEAN food• Enhance ASEAN cooperation
Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam
• Develop and accelerate the transfer and adoption of new technologies
Stocks are earmarked for reserve• Enhance private sector involvement• Sustainable development
EAERR: East Asia Emergency Rice Reserve (2004-2010)
Countries pledge a certain amount of rice; this rice can be used by other Asian countries in instances of emergency.
• Increased rice trade among participating countries• Promotion of regional cooperation through explicit mechanisms
Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, South Korea
Stocks are earmarked for reserve • Intra and inter-regional trade
APTERR: ASEAN Plus Three Emergency Rice Reserve (July 2012-present) Members are responsible for
maintaining reserves and in many cases the commitment to the APTERR will come from national food reserves
• Rice is made available during emergencies• Price stabilization of rice sector• Improving farmers income and welfare Brunei, Cambodia, Indonesia, Lao,
Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, South Korea
• Food security without distorting the international market
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
International Rice Reserves in Asia (2)
Name Withdrawal Repayment Effectiveness of Rice Reserve
SAARC: South Asian Association for Regional Cooperation (1987-present)
Members can withdraw grains when needed and then replace into the reserve within two years
Price, terms, and conditions for repayment are based on negotiations between member countries.
Small regional trade- has been slowly increasing, but tariffs still exist among member states
AERR: ASEAN Emergency Rice Reserve (1979-2004)
Process of bilateral negotiations between member countries
Terms and price of transaction of rice is determined by the world market
Unused, very little effectiveness. AERR never made a release from its stocks
EAERR: East Asia Emergency Rice Reserve (2004-2010)
Tier 1: releases are made under a special commercial transaction
Terms and price of transaction is determined by the world market
Food crisis of 2007/8 led to the creation of APTERRTier 2: terms of release are governed by
a loan or grant agreement
Tier 3: release for acute emergency
APTERR: ASEAN Plus Three Emergency Rice Reserve (July 2012-present)
Tier 1: specialized emergency contracts
Terms of loans and repayment has yet to be decided by the APTERR secretariat; contract pricing is determined by international market prices
Streamlined proceduresTier 2: release of earmarked emergency rice reserves in response to emergency demand
Potential distortions to international trade
Tier 3: release of physical stockpiles and cash donations for rice purchase to meet acute emergency need
Mobilization issues
Organizational issues
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
World Rice Stocks (end-year)2005/06 – 2012/13
End Stocks/End Stocks End Stocks Net Prod Net Trade End Stocks/ Trade
2006/07 2012/13 2009/10 2012/13 (Prod+Imps)* 2012/13China 35.9 46.9 115.8 -2.6 39.5% -0.05India 11.4 24.0 90.0 9.0 26.7% 0.38Thailand 2.5 12.5 18.3 6.4 66.4% 0.51Indonesia 4.6 3.6 35.2 -1.0 9.9% -0.28Philippines 4.9 1.4 1.5 -1.5 47.4% -1.06Vietnam 1.4 1.8 21.7 7.3 8.3% 4.05Japan 2.4 2.8 6.4 -0.5 38.8% -0.18Pakistan 0.7 0.7 5.6 3.0 12.4% 4.25Bangladesh 0.4 0.9 28.0 -0.3 3.1% -0.34United States 1.3 1.0 6.0 2.7 15.4% 2.61ROW 9.9 9.8 75.0 -19.5 9.7% -1.99Total 75.5 105.4 403.5 37.6 24.1% 0.36
Notes: Total trade figure is gross exports.* End stocks 2012/13 divided by the sum of 2012/13 net production and 2012/13 imports.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
World Rice Stocks (end-year)2005/06 – 2012/13
0
20
40
60
80
100
120
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
Mill
ion
Tons
China India Thailand Indonesia Philippines Japan Rest of World
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Bangladesh: Trade Liberalization and the Private Sector Rice Import Trade: 1994-2001
• Bangladesh liberalized its import trade in rice in the early 1990s.
• In years of relatively poor harvests in the mid- to late 1990s, import parity prices provided a price ceiling for Bangladesh domestic market prices.
• Following the 1998 flood, private sector imports exceeded 200 thousand tons/month for seven consecutive months, stabilizing domestic prices at import parity (based on India wholesale market prices plus transport and marketing costs).
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Bangladesh Rice Prices and Imports1997-2011
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Price Stabilization through Subsidized Trade2002/3 to 2006/7
• In 2000/01 and again from 2002/03 to 2006/07, Bangladesh prices tracked import parity based on BPL sales prices
• A specific Indian government program existed in 2002/3 for subsidized exports of rice obtained from FCI stocks at BPL prices
• There were no explicit policy statements regarding export subsidies in later years. We conduct econometric analysis to test whether the co-movement of wholesale and import parity prices is statistically significant.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
The 2007/08 World Price Shock and Disruption of Trade with India
• In mid-2007 world prices of major cereals rose sharply due to poor harvests in major producing countries and subsequent trade restrictions
• India announced a rice export ban in late 2007, but later negotiated a restricted volume of trade at set prices
• Bangladesh wholesale prices rose rapidly, but did not reach import parity with Thai rice, as international market prices hit record levels.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Bangladesh Rice Prices and Imports2005-11
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Rice Trade and Public Stock Policy
• Government policy following the 1998 flood shows that it is possible to have both public stocks (with a substantial PFDS) and to promote private trade at the same time.
• Given the uncertainties of trade with India and the international market, how much should public stocks be increased?
• Simulation analysis of the implications of higher public distribution (and implicitly stocks) in 2008 sheds light on this question
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Simulations: Increased Public Distribution
• In early 2008, public stocks were insufficient to allow much more distribution• End April stocks: rice 220K tons, wheat 120 K tons
• Simulations suggest that an extra 1.1mn tons of net distribution (with ½ month of private stock reduction) reduces the real price rise to only 2-3%
• If private stocks do not increase, an extra 300K tons of net distribution is sufficient to keep prices stable
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Implications of Low Cost Imports
• Large scale rice imports at BPL parity prices from 2002/03 to 2006/07 (950K / year)• Helped keep Bangladesh prices low and extremely
stable• Benefitted consumers in Bangladesh• Resulted in lower prices for producers (and lower
production)• Had zero direct cost to the Bangladesh government
• Lowering real rice prices to the levels of the mid-2000s through subsidized imports would entail large fiscal costs.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Implications for Bangladesh Rice Stocks
• The analysis suggests that ready availability of approximately 1.0 million tons of rice through drawdown of public stocks or imports would enable Bangladesh to handle similar disruptions in the future. • This figure assumes that private imports can
supplement supplies as in 2007/08, as well.• Otherwise, as much as 2.0 million tons would be
required.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Rice Export Policy:Thailand’s Increase in National Stocks
• Thailand substantially raised its support price for paddy in 2012, increased procurement and reduced exports in an effort to boost international prices and export earnings.
• Stocks have risen from less than 6 million tons in 2010 to more than 15 million in 2013.
• Domestic prices are now above the export price, implying a huge fiscal loss if these stocks are exported.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Thailand Rice Prices and Stocks
-
2
4
6
8
10
12
14
16
18
20
22
24
0
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009 2010 2011 2012 2013
mill
ion
tons
$/M
T
Stocks A1 Super B (fob) Support Price Paddy (milled equiv)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Thailand’s Export Policy and International Rice Prices
• Thailand’s policy of reducing its exports has not led to higher world prices.
• Other countries have increased their exports and filled the gap in supply• India’s exports rose from 2.23 to 10.25 million tons
between 2009/10 and 2011/12. • Vietnam’s exports also rose, from 6.73 to 7.72 million
tons, in the same period.
• International rice prices have remained stable.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Thailand Rice Export Price and Quantity: 2005-2013
0
100
200
300
400
500
600
700
800
900
0
200
400
600
800
1,000
1,200
Jan-
05
Jun-
05
Nov
-05
Apr
-06
Sep-
06
Feb-
07
Jul-0
7
Dec
-07
May
-08
Oct
-08
Mar
-09
Aug
-09
Jan-
10
Jun-
10
Nov
-10
Apr
-11
Sep-
11
Feb-
12
Jul-1
2
Dec
-12
May
-13
US$
/ton
thou
sand
MTs
Quantity Price
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
World Rice Exports2004/05 – 2012/13
0
5
10
15
20
25
30
35
40
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
mill
ion
tons
Thailand India Vietnam Pakistan United States Cambodia ROW
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Concluding Observations:International Reserves
• To date, international rice reserve arrangements have not been used in major emergencies.• There is no evidence that they have added to price
stability.
• Interests of net exporters and net importers differ sharply, especially in the short run.• Exporters have sometimes cut exports to prevent
price increases in domestic markets (India, 2008) or boost international prices and export earnings in the medium term (Thailand 2012-13)
• Consumers in net importing countries are harmed by these policies because of the higher cost of imports
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Concluding Observations: National Policies
• Importers have found that international trade often provides for more flexible and lower cost supplies than from international reserves.
• Nonetheless, moderate levels of national stocks provide an insurance against short-term disruptions in trade and can calm domestic markets
• In the medium term, both importers and exporters gain through promoting efficient domestic production
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
References
Dorosh, Paul and Shahidur Rashid. 2013. “Trade Subsidies, Export Bans and Price Stabilization: Lessons of Bangladesh – India Rice Trade in the 2000s”, Food Policy 41: 103-111 August. http://www.sciencedirect.com/science/article/pii/S0306919213000523
Dorosh, Paul A. 2001. “Trade Liberalization and National Food Security: Rice Trade between Bangladesh and India”, World Development, 29(4): 673-689.
Dorosh, Paul A. 2009. “Price Stabilization, International Trade and National Cereal Stocks: World Price Shocks and Policy Response in South Asia”, Food Security 1(2):137-149.
Top Related