Business

Report Warns Burma on Rice Price Volatility

By Kyaw Hsu Mon 25 November 2014

RANGOON — A new World Bank study warns that instability in the price of rice in Burma is posing challenges to the country’s largely impoverished farmers.

The study finds that “rice price volatility in Burma is the highest among net rice exporting countries in Asia, preventing farmers from earning high profits and keeping many families at or close to poverty income levels.”

The price of the commodity has particularly far-reaching implications in majority agrarian Burma, according to Abdoulaye Seck, the World Bank’s country manager in Burma.

“Agriculture is at the heart of poverty reduction in Myanmar. Changes in rice prices affect nearly 50 percent of the population whose livelihood depends on rice production,” he said.

According to the World Bank report, rice prices have risen by 40 percent between 2009-13, risking Burma’s overall food security and export competitiveness.

“A majority of rural population lives close to the poverty line and spends more than 60 percent of their incomes on food. Even temporary increase in rice prices reduces real income and households’ spending on health, education or more nutritious food. Rice price volatility, indeed, should concern everyone in Myanmar,” Seck said.

The rice market in Burma had until recently been in a downward spiral. A Chinese ban on rice imports from Burma and a rise in rice exports by neighboring Thailand were cited as leading to the price fall. Rice exports bottomed out at US$280 per 100 baskets (about 1.5 tons) in the middle of October, before rebounding this month as heavy rains led traders to speculate that this year might see a reduced harvest. Rice rose to $380 per 100 baskets last week.

“Paddy price is going up about 10 percent these days because of heavy rain—traders think prices will increase again,” said Chit Khine, chairman of the Myanmar Rice Federation.

The World Bank’s report said price volatility in Burma was mostly due to the fact that rice production is heavily concentrated in just two months of the year, November and December.

The report added that “fragmented seed market, poor roads, weak phone coverage, unreliable market information, low export diversification, and high costs for rice mills to maintain rice stocks amplify these price fluctuations even further.”

The World Bank recommended that rice production be better spread across a given year, and promoted efforts to lower the cost of doing business for farmers and traders, including by improving road and telecommunications links.

“Any strategy for stabilizing rice price volatility has to address its structural causes,” said Ulrich Zachau, the World Bank’s country director for Myanmar.

The global lender also advised against short-term measures to stabilize the rice market.

“Stable prices per se do not generate long-term agricultural growth if it is achieved through shortsighted policies,” said Sergiy Zorya, a Word Bank senior agricultural economist and lead author of the report. “Short-term measures such as export restrictions, minimum farm prices or government-owned stocks might reduce some volatility but rarely produce positive outcomes for food security and poverty reduction in the long term.”

Burma was once the world’s leading rice exporter, but the industry all but collapsed under the former military regime.

According to the Myanmar Rice Exporters Association, Burma’s rice exports in 2013-14 stood at about 1.2 million tons, down from 1.47 million tons the year before. President Thein Sein has set a target to export 4 million tons of rice by 2020.

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