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Competition and Hesitant Investors Put Brakes on Burma’s Rice Industry

William Boot by William Boot
October 30, 2013
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Competition and Hesitant Investors Put Brakes on Burma’s Rice Industry

Rice farmers sow their crops in western Burma’s Arakan State. (Photo: Steve Tickner / The Irrawaddy)

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Burma’s ambition to become a major rice exporter again is facing numerous hurdles, not least of which is the problem of oversupply in the world market.

Domestic media reported last week that Burma’s export earnings have already slumped about US$100 million so far in this financial year because of weaker harvests caused by poor weather. But a bigger problem is an export market bloated with better-quality rice than Burmese growers can produce, said Samarendu Mohanty, an economist with the International Rice Research Institute (IRRI).

“Global rice prices continue their downward spiral in the face of excess supply from the major exporting countries. The good-looking wet-season rice crop in the fields of most rice-growing countries in Asia is also putting additional pressure on the market,” Mohanty said in an IRRI October study.

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Burma’s rice exports for the first seven months of the current financial year, April-October, were only 450,000 tons compared with 730,000 tons in the same period of 2012, according to the Yangon Times.

The Ministry of Commerce said in September the country was still on target to achieve exports of 1.5 million tons for the full 2013-14 financial year to the end of March—a long way from optimistic Burmese industry forecasts made at the beginning of the year for a target of 3 million tons.

However, a recent report by the US Department of Agriculture (USDA) forecast that Burma’s total rice production for the current financial year would most likely leave only 750,000 tons available for export after domestic consumption demand is met.

The US government agency estimated a national harvest of 11 million tons, with local demand touching 10.25 million tons.

The IRRI is helping Burma to develop and use commercially new rice varieties which can grow better and more productively in areas of the country that suffer drought, regular flooding and sea inundations which bring damaging salt water.

But efforts by the Burma’s Rice Industry Association to attract investment, especially from major rice growing neighbor Thailand, have so far had only limited success. One of the major problems faced by Burma’s rice industry is old and inefficient milling plants and it had been hoped that Thai millers would see opportunities in Burma’s production sector.

The Thai Rice Millers’ Association told Reuters recently that potential investors remained hesitant to move into Burma because of continuing logistical problems such as inadequate electricity supply and poor transport infrastructure to move rice to ports and other dispatch centers.

Higher export hopes have also been dented by new competition from India.

“Burma’s exports have slowed due to the re-emergence of India in the non-basmati trade and [Burma] is losing market share in its traditional markets of Bangladesh, the Philippines, and West Africa,” said an industry study by the USDA Foreign Agricultural Service earlier this year. It warned that the new competition would afflict Burma’s 2013-14 financial year and possibly beyond.

There are other competition problems too.

“The lack of [Burmese] government support has put Burmese farmers at a competitive disadvantage with some of its ASEAN counterparts, such as Thai and Vietnamese farmers who receive government support to compensate for lower prices,” said the USDA study. “The decline in global rice prices has hit Burmese farmers hard as they are currently selling rice at or below production cost,” it said.

However, Burma could benefit from Thailand pricing itself out of some markets because of higher prices demanded to cover the generous state subsidy to Thai farmers, said the IRRI.

“Chinese purchases of rice primarily from Vietnam, Pakistan, and [Burma] have supported the market in the past few months,” Mohanty said in his market assessment for the IRRI. “China is well on its way to claiming the top spot in 2013 with 3 million tons of imports, with nearly half already imported in the first half of the year. Chinese imports may go even higher if global rice prices continue their downward spiral for the remainder of the year.”

Burma’s rice producers are already adapting to this potentially large new customer by expanding acreage under cultivation to include summer rice varieties that are “better suited for the dry season and also meet Chinese consumer demands,” the study noted.

But if Thai investors are hesitant Taiwanese might yet step in to help.

A business delegation from Taipei led by Taiwan’s International Economic Cooperation Association is scheduled to visit Rangoon in November. And although it will be a wide-based delegation embracing heavy industry and pharmaceuticals, the focus is expected to be in Burma’s rice industry, the Taipei Times reported.

“Although the growth of rice yield has been highly uneven in [Burma], it has a large potential to produce more rice. We will work with [Burma] to develop rice varieties that can boost its food supplies under its climate conditions,” the Taiwan association’s secretary-general, Tao Wen-lung, was quoted by the newspaper as saying.

Towards the end of the British colonial era in the 1930s, Burma became the world’s biggest rice exporter, dispatching up to 7 million tonnes a year and winning the epithet “rice bowl of the world.” It has a long way to go to reclaim that crown, but as the IRRI’s director-general Robert Zeigler has said, there is “huge potential to grow.”

Your Thoughts …
William Boot

William Boot

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