The 2008-09 global rice market is likely to remain tight, with higher overall consumption pushing up prices for the commodity despite an estimated record production of 432 million tonnes (milled rice) — a 1 per cent increase over last year’s 428 million tonnes.

India, which accounts for more than half the increase in projected rice area of one million hectares in 2008-09 to 155.3 million hectares, is set to become an important player in this scenario.

Export restrictions imposed by various countries would also constrain supply and push up prices. Current export prices for non basmati grains have been plummeting, with Thai rice hitting the psychological below $700 per tonne level in the first week of October. Prices zoomed down further to below $600 per tonne and are expected to plummet further by the end of the year to $500-550 per tonne or even lower.

International Rice Research Institute director general Robert S Ziegler recently wrote that the demand for rice would increase worldwide keeping prices firm, since the economic slowdown would force poor people to eat more rice in place of meat.

The recent Rice Today article said, “Despite higher prices, rice consumption is expected to remain strong because of substitution away from more expensive foods such as fruits, vegetables, and livestock products. Increasing consumption would push up prices noticeably.”

Significantly, global consumption is pegged at 426 m tonnes, an increase of one per cent over the previous year. That should about level out any gains from an increased overall output.

In a write-up (Rice crisis: The Aftermath), Samarendu Mohanty, head of the International Rice Research Institute’s Social Sciences Division, has argued that the price tightness worldwide for rice, irrespective of plunging prices for other commodities, would primarily persist because countries have been drawing down their stocks to meet the deceleration arising from stagnant yield.

Current global rice stocks have declined from a 135 day supply to a 70 day supply in the last seven years, a whopping 40 per cent drop from 147 million tonnes in 2001 to only 82 million tonnes in 2008. The US would contribute to the problem as its already depleted rice stocks are set to be ravaged further.

However, with the bulk of the 2008 crop entering the market in October, price softening would be evident. From 2001 to 2007, rice prices nearly doubled primarily because of heavy stock depletion. Between November 2007 and May 2008, export prices have almost tripled. Since then, prices have softened but continued to remain high.

The India factor is, in fact, expected to contribute positively to the projected increase in global rice output, but productivity or projected yield per acre is likely to remain unchanged from last year, according to a Rice Today (Oct-Dec 2008 issue) write-up.

While output in 2007-08 increased by 2 per cent above the 2006 output level of 420 million tonnes (also a record), the annual rice yield gowth rate has dropped to less than 1 per cent in recent years, compared with 2-3 per cent during the Green Revolution period of 1967-70.

“Declining investments in all areas of rice research and infrastructure development (including irrigation) have been largely responsible for such dramatic slowing in yield growth, not true for many other field crops such as maize, soyabean and cotton.”

Another positive contribution by India to the world’s evolving rice map would also be an overall reduction in its share in the total world 
consumption.

Together with China, India’s consumption is set to fall from 57 per cent in 2007 to 49 per cent in 2020. The per capita consumption of rice, too, would go down by 4.2 kg and 3.5 kg respectively for China and India.

A recent analysis by IRRI projects that, as the standard of living in the developing countries rises in the future, overall per capita consumption would also decline slightly from 64 kgs in 2007 to 63.2 kgs in 2020.

Crucially, however, the total consumption in the two countries would go up by a good 18 million tonnes on account of population growth.

That would, naturally, nullify any perceived gains in additional rice stocks and keep global rice prices buoyant. In other countries including the Philippines, Myanmar, Bangladesh, Malaysia, Saudi Arabia and many African nations, the per capita consumption would go up in the same period.

Immigration and food diversities would also ensure higher consumption in many developed countries of North America and the EU. Global average per capita consumption has been flat for the last five years, declining in some countries (China, Japan, Thailand) and going up in others such as the US and India.