Asia’s rice bowls

IN ASIA kingdoms are said to rise and fall with the shifting price of rice. So the continent’s rulers presumably ought to be worried by the effects of disastrous floods in Thailand, the world’s biggest exporter of the white grains (see chart).

Last year Thailand provided about a third by volume of all internationally traded rice—around 10m tonnes. Thailand’s government reckons that some 5m-6m tonnes (nearly a fifth of the country’s total production) might have been destroyed by the deluge. Some analysts say that the damage could be even more severe. Pessimists worry that Thailand’s exports could be cut by 3m-4m tonnes. With the world trade in rice expected to hit over 33m tonnes in 2011 this could take around 10% out of the market. If the same thing happened with oil or wheat the results would be calamitous.

But the nature of the rice market means that the consequences may not be as severe. Rice is a resilient crop, and the floods may not do as much damage as some fear. Although rice is a staple for half the world’s population, international trade is small compared with the 451m tonnes that will pop out of the ground in the 2010-11 growing season. Only about 7% of the total crop hits global markets, compared with 20% or so for wheat.

Politics and tastes mean that rice is mainly consumed where it is grown. Rice is such a vital foodstuff in Asia—some 90% is grown and eaten there—that policies aim at self-sufficiency. Domestic markets are usually heavily regulated and protected. It is one of the most politicised of commodities, according to Concepción Calpe of the Food and Agriculture Organisation. Moreover rice comes in many varieties: long-grain, short-grain, sticky, fluffy and so on. Consumers want their customary sort, not an unfamiliar rice from far afield.

The result is that many rice-eating countries are detached from the price swings in global markets, according to Darren Cooper of the International Grains Council, a research body. Others aim to be. China, the world’s biggest producer at around 130m tonnes a year, is largely self-sufficient. The Philippines, the world’s biggest importer, plans to cultivate all its own rice by 2013.

What’s more, it has been an excellent year for rice crops on the whole. Droughts in Arkansas, America’s main rice-growing area, have hit the crop: exports will be closer to 3m than 4m tonnes this year. But bumper crops in India and Pakistan should help offset a shortfall in Thai exports.

The excellent harvest in India convinced politicians, once fearful of food inflation, to lower protectionist defences. The government lifted an export ban on white rice in September, allowing 2m tonnes to be exported before Thailand’s floods. Indian traders, worried that the decision will be reversed, have quickly sold almost all the allowance at rock-bottom prices. This has proved good news for African countries, which import around 10m tonnes annually, a third of the global trade.

The floods will have some impact. Thailand’s benchmark rice is currently fetching around $630 a tonne, roughly what it cost at the start of September. Credit Suisse thinks prices might hit $700 before the end of the year. More gloomy forecasters say that it could even top $800. But kingdoms will not totter.