The rice crisis: what needs to be done?

In the first few months of 2008, the export price of rice tripled, reaching levels not seen since the last great food crisis of the early 1970s.

A host of factors converged to drive the price spike, which put adequate supplies of rice - the staple for around half the world's population, including the majority of the world's poor - out of reach for millions of consumers, largely in Asia, but also in other rice-consuming regions around the world. Several countries experienced rice protests and riots. In Haiti, several people were killed and the Prime Minister was sacked. In Bangladesh, with country reeling from floods and a major cyclone, thousands of workers rioted over wages too low to feed themselves and their families.

As of June 2008, prices had begun to come down from the extraordinary peaks of the previous two months. However, agricultural economists the world over expected that process would settle at a level considerably higher than that of early 2007, before the rapid rise. Higher rice prices, it was agreed, were here to stay for some years. In response to the situation, the United Nations hosted an emergency food summit in Rome on June 3-5, 2008, prompting world leaders to pledge to reinvest in agriculture.

By examining the causes behind the price increase, several responses become clear, particularly if we are to avoid similar situations in the future. One of the keys to producing enough affordable rice for a growing world population is a rejuvenation of investment in public agricultural research.

What happened?

The poorest of the world's poor are the 1.1 billion people with income of less than a dollar a day. Around 700 million - almost two-thirds - of these people live in rice-growing countries of Asia. Rice, the dominant staple in Asia, accounts for more than 40 per cent of the calorie consumption of most Asians. Poor people spend as much as 30-40 per cent of their income on rice alone.

Major exporting countries such as Vietnam and India announced export restrictions to protect their domestic consumers. These restrictions prompted rapid buying from importing nations, which further pushed up the price as the rice supply in the world market dwindled. As the price spiked, hoarding and speculation exacerbated the problem.

What are the underlying reasons for the rice crisis?

We are consuming more than we are producing
Many factors, both long- and short-term, have contributed to the rice crisis. At a fundamental level, the sustained rise in the price over the past 7-8 years indicates that we have been consuming more than we have been producing. Rice stocks are being depleted, with current stocks at their lowest since the 1970s.

Annual growth in yield is slowing
A major reason for the imbalance between the long-term demand and supply is the slowing growth in yield, which has decreased substantially over the past 10-15 years in most countries. Globally, yields have risen by less than 1 per cent per year in recent years - slower than population growth and down from well over 2 per cent in 1970-90 - the period known as the Asian Green Revolution, which was characterised by high-yielding, fertiliser-responsive rice varieties and rapid boost in yields.

Reduced public investment in agricultural research, development, and infrastructure
An important factor accounting for the slowdown in yield growth is the reduced public investment in agricultural research and development - the very engine that drove productivity growth to begin with. The steady decline in rice prices through the 1990s led many governments to believe there was a perpetual supply of plentiful food. Lower prices were taken for granted, leading to complacency in agricultural research and development. Investments in irrigation have decreased substantially and existing irrigation infrastructure has deteriorated.

Little room for expansion of rice area
The possibility of increasing the rice area is almost exhausted in most Asian countries. In many areas, highly productive rice land has been lost to housing and industrial development.

Demand growth
Three key factors have contributed to steady growth in demand for rice, which is increasing globally by about 5 million tons each year. First, population growth is outstripping production growth, and this is projected to get worse. Second, rapid economic growth in large countries such as India and China has increased demand for cereals, both for consumption and for livestock production, pushing up the price of cereals in general. Third, rice is an increasingly popular food in Africa, with imports into Africa accounting for almost one-third of the total world trade. It is expected that demand from Africa will continue to grow.

Oil prices
The price of oil has increased rapidly during the past year. In addition to contributing to general inflationary pressure, this has pushed up freight costs for importers and production costs have risen due to higher fuel and fertilser prices (fertiliser production is heavily dependent oil and natural gas). Rising oil prices and concerns about climate change have also spurred rapid investments in biofuels, increasing pressure on international trade of grains and livestock feed, as well as on agricultural land in some countries.

Extreme weather
Natural disasters, such as flooding, drought, and typhoons, have contributed to recent production shortfalls. Climate change is expected to increase the severity and frequency of extreme weather events and the steady rise in global temperatures is expected to hurt rice production.

Recurring pest outbreaks
Many pests that caused major problems for rice intensification programs in the 1970s and 1980s have returned as major threats to production, primarily due to breakdowns in crop resistance and the excessive use of insecticides that disrupt natural pest control mechanisms.

How do price rises affect poor rice consumers?

Although more expensive rice may help farmers who produce more than they consume, a rise in the price of rice is equivalent to a drop in real income for the majority of the poor who are net consumers of rice, and who can spend almost half their income on rice alone. Such a drop in income both increases the number of poor people and pushes people deeper into poverty and hunger. Consequently, people are forced to sacrifice essentials such as more nutritious food, health care, and children's education - thus condemning future generations to a vicious poverty cycle.

Compounding the problem, a young child who is malnourished for just several months will be affected for the rest of his or her life. The rise in food prices also affects the poor indirectly as international relief agencies are forced to provide less food.

How do we prevent shortages and price rises?

Many of the factors that led to the recent price spike are likely to keep rice prices well above their historic lows. The best strategy for keeping the price of rice down is to ensure that production increases faster than demand. Rice production can be increased by expanding the area planted to rice, by increasing the yield per unit area, or by a combination of the two. With limited opportunity for increasing Asia's rice area, the main source of additional production will need to be yield growth.

Productivity growth through the development and dissemination of improved technologies is the only long-term viable solution for bringing prices down, preventing future increases in price, and ensuring that affordable rice is available to poor rice consumers.

To achieve this, a second Green Revolution is needed now as much as the first was needed to avoid famine and mass starvation. Increased research investment together with policy reforms that make rice markets more efficient will help bring rice prices down to a level affordable to the poor and, ultimately, reduce poverty.

What needs to be done?

Recent advances in science and technology offer unprecedented opportunities to not only solve current problems but also develop agricultural systems that can help millions of rural poor lift themselves out of poverty. In the near term, urgent actions from national governments and international agencies are needed on two fronts: rapidly exploiting existing technological opportunities for increasing rice yields and policy reforms to improve poor people's food entitlements. Rice production can be revitalised, but there are no silver bullets. The world community must invest now and for a long time to come.

Some of the following actions deal with the immediate crisis while others provide long-term solutions to prevent future crises.

1. Bring about an agronomic revolution in Asian rice production to reduce existing gaps between achieved and potential yield: Yield improvements of 1-2 tons per hectare can be achieved through the use of better crop management practices, particularly in irrigated environments.
    
2. Accelerate the delivery of new postharvest technologies to reduce losses: Postharvest includes the storing, drying, and processing of rice. New and existing technologies can substantially reduce the considerable postharvest losses - in terms of both quantity and quality - suffered by most Asian farmers.
    
3. Accelerate the introduction and adoption of higher yielding rice varieties.
    
4. Strengthen and upgrade the rice breeding and research pipelines: Funding for the development of new rice varieties has steadily declined over the past decade or more. This must be reversed in order to develop the new rice varieties and crop and resource management systems that will be required for sustained productivity growth.
    
5. Accelerate research on the world's thousands of rice varieties so scientists can tap the vast reservoir of untapped knowledge they contain: The International Rice Research Institute's International Rice Genebank holds more than 100,000 types of rice, some of which hold the genetic keys that will help researchers develop better varieties.
    
6. Develop a new generation of rice scientists and researchers for the public and private sectors: Asia urgently needs to train a new generation of rice scientists and researchers - before the present generation retires - if the region's rice industry is to successfully capitalise on advances in modern science.
    
7. Increase public investment in agricultural infrastructure: Adequate investments in agricultural infrastructure such as roads, irrigation systems, and market systems are critically important for raising and sustaining productivity growth in rice.
    
8. Reform policy to improve the efficiency of marketing systems for both inputs and outputs: In developing countries, higher consumer prices are not always reflected in higher farm-gate prices that would give farmers incentive to increase production. Policies are needed that improve market systems and allow the private sector to function smoothly.
    
9. Strengthen food safety nets for the poor: Both urban and rural poor people need backups such as food or income transfers and nutrition programs focusing on early childhood.