Asia's rice crisis easing

Amid expectations of a record harvest, prices decline. Cambodia lifted its export ban this week.

By , Correspondent of The Christian Science Monitor

Asia's rice crisis, which has shaken governments and fomented social unrest, could be easing, as regional exporters announce bumper harvests and consider lifting export bans, developments that could inject badly need stocks back into world markets.

In an announcement that garnered praise around the region, Prime Minister Hun Sen said on Tuesday that Cambodia would lift an export ban imposed in March and sell 1.6 million metric tons of rice held in its stocks after determining that it had enough rice to meet the country's demand.

The move by Cambodia – the first exporting country to lift its ban – signals that, thanks to good weather forecasts, bountiful harvests are on the horizon, experts say.

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"We expect this year to be a very good harvest," says Ny Lyheng, managing director of the Federation of Cambodian Rice Millers Association in Phnom Pehn, the capital. Cambodia is expecting to harvest 6.8 million metric tons, up from 6.7 million metric tons last year.

Rice, the staple diet of half the world's population, has increased in price by 76 percent in Asia and many other parts of the world since December, a result of shortage concerns and regional export bans. But experts have been counseling that, as long as harvests do well this year in Asia – where three-quarters of exportable rice is grown – the crisis will ease.

That seems to be happening. Authorities in Vietnam – the world's second-largest producer - say they expect to be able to export 4.3 million metric tons. As a result, an export ban imposed in March is likely to be lifted by July, according to Bloomberg.

And Pakistan, the world's fifth-largest exporter, announced on May 16th that it has enough rice to meet domestic demand and would sell 1 million metric tons overseas.

"The markets needed some positive signs, and this is one of them," says Duncan Macintosh, spokesman for the International Rice Research Institute in the Philippines, referring to Cambodia's announcement. "The harvest has just gotten under way and there's a lot of rice reaching markets in Asia."

The developments come days after the Food and Agricultural Organization of the United Nations (FAO) announced that, despite jitters over tight supplies, the world's output of milled rice would actually reach record levels this year, easing concerns of global shortages.

"World paddy production 2008 could grow by about 2.3 percent, reaching a new record level of 666 million tonnes, according to our preliminary forecasts," an FAO statement says, but warns that rice prices will remain high for now pending the harvesting of this year's rice crops.

The announcements have helped drive down prices of rice by 28 percent on the Chicago Board of Trade, the lowest in 10 weeks, Bloomberg News reported.

Rice prices have skyrocketed because of a confluence of global trends, including soaring gasoline prices (needed to produce and transport rice), and droughts in Australia and Vietnam, which have undercut stocks.

But they've also risen because exporters like Vietnam and Cambodia, seeking to ensure domestic supplies and bring down inflation, imposed strict bans on their exports at a time when those exports were needed most. That meant that less rice was available on global markets, which induced more panic, pushing prices up even further.

Not that all Asian suppliers have imposed bans: Thailand, the world's largest rice exporter, has continued selling rice, as has Pakistan, which never imposed a ban on rice exports because rice is not a staple in that country – wheat is.

Further driving up prices are the huge rice demands of the Philippines, the world's largest rice importer. The country, which is expecting a shortfall of rice supplies this year, has been struggling to fill tenders for up to 2.7 million tons of imports. Last week, Thailand pledged to offer the Philippines negotiable prices, while Japan agreed to sell it 200,000 tons.

Analysts warned that while the crisis may have eased for the moment, rice supplies remain a long-term challenge for the developing world.

Mr. Macintosh, in Japan to attend the Tokyo International Conference on African Development, said rice topped the list of many African leaders' concerns.

"While the crisis has eased, anyone who has any doubts that the problem remains just has to look at Africa ," he says. "It still imports about half its rice, and it has the fastest growing demand."

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