Food prices, particularly rice, have surged this year, fuelling inflation and increasing political tensions across the region. Low productivity, inadequate investment and land encroachment are creating supply bottlenecks, challenging regional leaders to muster the political will to break up powerful marketing cartels and set aside competitive jealousies.
Association of South-east Asian Nations (ASEAN) trade ministers on May 3 agreed to cooperate more closely on food security. They acknowledged that access to reliable rice supplies and stable prices are fundamental to economic and social wellbeing across the region. However, they failed to agree on concrete measures to rein in rice prices, or to ensure that major importing nations in the region have adequate supplies.
An ASEAN Food Security Reserve exists. It is part of an East Asia Emergency Rice Reserve involving China, Japan and South Korea. Yet it is only for use during natural emergencies or major disasters.
The UN Food and Agriculture Organisation has forecast that rice shipments could drop by 3.5% this year due to lower output and export curbs, with supply shortages continuing until the fourth quarter. ASEAN's failure to take a strong stand on the issue to date underscores the competitive tensions that have pitted exporters against regional buyers.
Suppliers battle. Thailand and Vietnam (the two biggest rice exporters), and Cambodia have imposed taxes, quotas and minimum prices to discourage shipments, prompting marketing groups to withhold supplies. Development agencies say that this has fuelled price volatility. The governments say that they have acted to protect domestic reserves and contain inflation. While some shippers may be taking advantage of global shortages to manipulate prices, there is no evidence of widespread profiteering:
- Thailand consumes only 10 million tonnes of the 18-19 million tonnes of rice it typically produces each year.
- However, it exported 4.07 million tonnes in the first four months of this year alone, compared with 9.55 tonnes in the whole of 2007.
- Vietnam, which is cutting shipments by 22% this year, has been affected by poor weather in highland areas that has destroyed about 150,000 hectares of rice.
- Cambodia is struggling to meet its food needs, and is expecting to export just eight million tonnes of rice between now and 2015.