Concerns Grow Over Severe Slump in Rice Prices

By Kyaw Hsu Mon 30 October 2014

RANGOON — Rice prices and exports have experienced a sharp drop this year as a result of a tightening of import restrictions by China, Myanmar Rice Federation Chairman Chit Khaing said on Thursday.

The slump in rice prices comes ahead of the start of the main rice harvest season and could have a serious impact on the livelihood of Burma’s farmers, already among the country’s poorest groups.

Chit Khaing said prices currently stood at about US$330 per 100 baskets of paddy (about 1,500 kilogram), down from about $400 per 100 baskets last year.

“Due to this big drop in prices a lot of farmers will face problems,” he said, adding that a tightening of Chinese border controls on the quality of Burmese rice and a crackdown on the smuggling of rice had caused the drop in demand and prices.

“At the same time, Thailand is increasing its rice sales on the international market too, that’s why paddy prices here keep falling,” he said, adding that domestic rice demand had already been met.

Until now, China had been buying up more than half of all Burma’s annual rice export, with much of the low quality paddy produced in the Irrawaddy Delta and central regions flowing across the Burma-China border with few border checks and through smuggling routes.

This year, however, China has taken steps to legalize and control its import of Burmese rice, demanding that an trade agreement be signed that guarantees that most rice is milled and meets certain quality and hygienic requirements, so-called sanitary and phytosanitary (SPS) standards.

Chit Khaing said Naypyidaw and Beijing are discussing a bilateral agreement on SPS standards that would allow the Myanmar Rice Federation to legally export some 200,000 tons of milled rice to China.

Earlier this month, the federation reached an agreement with Indian rice traders to supply two states in Northeastern India with 20,000 tons of rice per month sold at $400 per ton, but Burmese traders will have to arrange the costly transport to the Burma-India border.

Burma’s rice exports had been slowly increasing after President Thein Sein’s government in 2011 began to prioritize agriculture and set a rice export goal of 4 million tons by 2020. But last year exports began to dip, a trend that is continuing this year. According to the Myanmar Rice Exporters Association, total rice exports in 2013-2014 stood at about 1.2 million tons, down from 1.47 million tons the year before.

Chit Khaing, who also owns Eden Group conglomerate with interests in construction, banking, hotels and tourism, did not provide a detailed figure for the volume of the rice exports so far.

Burma’s main rice harvest season is due to start in November and will continue until late December. The agriculture sector is the country’s largest employer and 70 percent of all Burmese live in rural areas.

Chit Khaing said the government and the federation were taking steps to try to boost rice demand and shield farmers from the impact.

He said the federation would seek government and private sector help so that farmers could store rice in warehouses until prices rise and in the meantime take out a loan with their rice stocks serving as collateral.

“We’re going to discuss with farmers, traders and exporters this week how to increase paddy prices,” Chit Khaing said, adding that the Burma Army would also buy up a significant amount rice to feed its troops this month.

“We believe that we can solve this problem soon,” he said, adding that in 2012-2013 rice prices had dropped even lower to $270 per 100 baskets.

Kyaw Naing Oo, a farmer who owns 15 acres of paddy in Pegu Division’s Tharrawaddy Township, said, however, that farmers in the region were deeply concerned over the drop in rice prices and many feared they would not be able to repay their loans this year and sink into debt.

“Prices had reached up to 450,000 kyats [$450] per 100 baskets last year. At that time, we guessed we could get good prices easily, but this year we have no hope,” he said.

Kyaw Naing Oo said farmers spent between $150 and $200 per acre to prepare for a rice harvest, but were now offered farm gate prices by brokers of between $200 and $250, meaning many would earn only a small amount of cash this year.

Kyaw Naing Oo had little hope that a SPS agreement between Burma and China would help the farmers, as he heard reports that one large local company would be granted the license to control all export to China and so could dictate low rice prices to supplying farmers.

Paddy yields in Burma are among the lowest in Southeast Asia at 2.5 metric tons per hectare and most rice mills used outdated machinery that produces rice with a high percentage of broken grains, making it unsuitable for high-value foreign export markets such as the European Union and Japan.

A World Bank report in June said the government would need to take a range of measures to improve the quality of rice through investments in rice mills, while it should also reduce transport costs and formulate policies to support rice export and agricultural production.