Rice Stocks and Trade Policy in Asia- Paul Dorosh
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Rice Stocks and Trade Policy in Asia- Paul Dorosh

on

  • 592 views

 

Statistics

Views

Total Views
592
Views on SlideShare
553
Embed Views
39

Actions

Likes
0
Downloads
11
Comments
0

3 Embeds 39

http://rice-trade.blogspot.in 23
http://rice-trade.blogspot.com 15
http://rice-trade.blogspot.sg 1

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment
  • SAARC: prices quoted for repayment should be lower than the prices generally charged and the price should be representative of international and domestic markets AERR: The reserve was ineffective because The reserves were too small to be effective The bilateral negotiation procedure for the reserve was a duplication of regular market transactions The secretariat had no funds to allow the reserve to function as a regional entity EAERR: Tier 1: Rice reserve functions as an intermediary broker Tier 2: loan or grant terms are decided by the earmarking country Tier 3: receiving country is expected to handle the logistics and costs Effectiveness: transformed into APTERR, which is supposed to act as a long term security mechanism APTERR: Tier 1: contracts to meet emergency demand Tier 2: Release is based on long term loan agreements between countries supplying and demanding rice Tier 3: food aid Effectiveness: Procedures need to be streamlined to make the release of stocks more frequent Financial issues for the mobilization of funds from member countries Organizational issues: harmonized laws, policies, and regulations across member states
  • In 2011 Thailand increased its export price of rice, therefore reducing the amount of rice it sold to the world market India’s exports immediately increased to fill the gap in the world market All other exporting countries kept exports relatively the same throughout this period
  • In 2011 Thailand increased its export price of rice, therefore reducing the amount of rice it sold to the world market India’s exports immediately increased to fill the gap in the world market All other exporting countries kept exports relatively the same throughout this period
  • 1. from 2005-2007 the government purchase price of rice was above the export price 2. Between 2007-2010.11 the government employed an "income guarantee scheme" that supported farmers 3. 2011 political elections in Thailand, Pheu Thai Party wins and introduces an agricultural program that favors rural small farmers 4. In the "Rice Mortgage Scheme" the government purchases paddy at above market prices from rural farmers a. this was a government attempt at winning favor in the rural areas b. the government was also attempting to influence world market prices 5. Currently Thailand is having a problem where the government has accumulated too many rice stocks through the scheme and is unable to sell these stocks a. No incentive to purchase the stocks since they're being sold at above world market price b. the government is losing money and reserves from the scheme since they are purchasing the stocks at above world market prices
  • In 2011 Thailand increased its export price of rice, therefore reducing the amount of rice it sold to the world market India’s exports immediately increased to fill the gap in the world market All other exporting countries kept exports relatively the same throughout this period

Rice Stocks and Trade Policy in Asia- Paul Dorosh Presentation Transcript

  • 1. Rice Stocks and Trade Policy in Asia: A Role for International Stock Arrangements? Paul A. Dorosh International Food Policy Research Institute Agricultural Transformation in Asia: Policy Options for Food and Nutrition Security Siem Reap, Cambodia September 24, 2013 Thanks to Abigail Childs for research support on this work.
  • 2. 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
  • 3. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE International Rice Reserves in Asia Name Stocks Goals SAARC: 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 welfareBrunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines, Singapore, Thailand, Viet Nam, China, Japan, South Korea • Food security without distorting the international market
  • 4. 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 procedures Tier 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
  • 5. 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)* 2012/13 China 35.9 46.9 115.8 -2.6 39.5% -0.05 India 11.4 24.0 90.0 9.0 26.7% 0.38 Thailand 2.5 12.5 18.3 6.4 66.4% 0.51 Indonesia 4.6 3.6 35.2 -1.0 9.9% -0.28 Philippines 4.9 1.4 1.5 -1.5 47.4% -1.06 Vietnam 1.4 1.8 21.7 7.3 8.3% 4.05 Japan 2.4 2.8 6.4 -0.5 38.8% -0.18 Pakistan 0.7 0.7 5.6 3.0 12.4% 4.25 Bangladesh 0.4 0.9 28.0 -0.3 3.1% -0.34 United States 1.3 1.0 6.0 2.7 15.4% 2.61 ROW 9.9 9.8 75.0 -19.5 9.7% -1.99 Total 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.
  • 6. 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 MillionTons China India Thailand Indonesia Philippines Japan Rest of World
  • 7. 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).
  • 8. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Bangladesh Rice Prices and Imports 1997-2011
  • 9. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Price Stabilization through Subsidized Trade 2002/3 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.
  • 10. 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.
  • 11. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Bangladesh Rice Prices and Imports 2005-11
  • 12. 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
  • 13. 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
  • 14. 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.
  • 15. 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.
  • 16. 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.
  • 17. 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 milliontons $/MT Stocks A1 Super B (fob) Support Price Paddy (milled equiv)
  • 18. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Thailand’s Export Policy and International Rice Prices • Thailand’s policy of reducing its exports has not led to higher world prices. • Other countries have increased their exports and filled the gap in supply • India’s exports rose from 2.23 to 10.25 million tons between 2009/10 and 2011/12. • Vietnam’s exports also rose, from 6.73 to 7.72 million tons, in the same period. • International rice prices have remained stable.
  • 19. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Thailand Rice Export Price and Quantity: 2005-2013 0 100 200 300 400 500 600 700 800 900 0 200 400 600 800 1,000 1,200 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 US$/ton thousandMTs Quantity Price
  • 20. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE World Rice Exports 2004/05 – 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 milliontons Thailand India Vietnam Pakistan United States Cambodia ROW
  • 21. 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
  • 22. 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
  • 23. 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.