Ideas to Action:

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Views from the Center


This posting is joint with Peter Timmer and Vijaya Ramachandran

Over the past few weeks, rice consumers in Africa and other developing countries have watched anxiously as world prices have fallen steadily, at least in part due to our insistence that Japan and other countries have stocks that can be released on world markets . It is now clear that the speculative bubble has burst -- the "dynamic" in the market is bearish despite set-backs on individual policy fronts. The pressures on rice prices continue to be downward despite everything governments are doing to keep prices up.

But progress is far from adequate. For the millions of people, in Africa and elsewhere, who are facing hunger and starvation due to high food prices, time is running out. Early warning systems indicate that the Horn of Africa is sliding into yet another famine. Africa, in the best of times, does not enjoy much food security, relying on imports for up to 50 percent of urban consumption. About 9 million metric tons of rice are imported into the continent each year. The current situation with regard to food prices is nothing short of catastrophic.

On July 7-9, Japan will host the G8 Summit, in the beautiful city of Hokkaido-Toyako. Japan must show leadership while on center stage -- it must act now, by releasing its 1.5 million metric tons of unwanted rice stocks -- either to the World Food Programme or to international markets, thereby setting an example for other governments to swiftly mitigate the immediate impacts of the food crisis.

The Japanese government is likely aware that there is much to be done. Rice policy changes in Thailand and Vietnam – combined with inactivity in Japan and India -- have frustrated prices from moving to more affordable levels.

Bangkok Caves To Farmers' Demands. The Thai government, confronted by farmers disappointed that paddy prices were declining from record levels and threatening a blockade of roads leading into Bangkok, capitulated to their demands and more than doubled the price support of rice. Thai wholesale prices have see-sawed since the announcement, but are up 10-12% from the price on the day before the government's announcement. Thai export prices, though, have steadied at $780 (for 100% B rice) as overseas buyers remained on the sidelines waiting for more affordable values.

Hanoi Says It Wants More Sales, But At a Price. While Vietnam this week ended its export ban and increased its export target by as much as 1 million tons, it imposed a minimum export price of $800 -- which is $50/ton above the local costs. Exports at this level presumably will also be subject to an export tax of $30/ton. With Thai rice being $70 cheaper at $760, buyers were decidedly unimpressed and the acceleration in sales expected by Hanoi is unlikely to occur.

New Delhi Continues to Stall. Meanwhile, India continues its "starve thy neighbor" policy. Despite mounting government-held food grain stocks as a result of a record harvest and an excellent monsoon with rainfall 45% above normal, India is yet to increase the supply of grains on international markets.

Earlier hints that it might provide exceptions to its export ban for strategic neighbors or African clients have proven to be false. Instead, Indian Commerce Secretary Pillai offered a weak promise that New Delhi would reconsider its ban in October or November once the condition of the wet season crop was assured.

Japan Can Still Show Leadership. On Monday June 16, former UN Secretary-General Kofi Annan released the report of the Africa Progress Panel in London, and warned that millions of Africans are facing starvation because of sustained high food prices. Mr Annan called on Japan and the other members of the G8 to immediately review their policies on food stockpiles and to increase the food available for purchase on international markets. This message was picked up by scores of media outlets in Europe, Japan, the United States, the Middle East and by dozens of newspapers, TV and radio stations and websites in Africa. On June 20, the leaders of the Catholic Church in the G8 countries submitted a letter to their heads of state citing the message of the Africa Progress Panel and emphasizing the importance of "alleviating the abject poverty which ruins the lives of millions of people living in the southern hemisphere."

But Japan is yet to act. While the U.S. gave the green light to Japan in mid-May to re-export the more than 1.5 million tons of unwanted imported rice in its warehouses, Tokyo's response has been timid. Not only has Japan failed to strike a single deal -- holding out for very high prices in the 200,000 tons of rice it is discussing with the Philippines, but Prime Minister Fukuda has also failed to show any leadership whatsoever at the FAO meeting on the food crisis in early June, when he announced that Japan was only prepared "to release in the near future over 300,000 tons." It is time for Japan to quit stalling and show some real leadership by releasing its unwanted rice stocks.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.