Filled rice bowls: renewed complacency? Bas Bouman, Sam Mohanty IRRI Thursday Seminar, 12 may 2106

How much rice will be needed? * How certain are we about that? PREAMBLE Strategic planning: how will the future look like – what should IRRI be doing? How much rice will be needed? * * At prices affordable to the poor How certain are we about that? MUCH MEDIUM LITTLE CERTAIN SO SO UNCERTAIN IRRI CRITICS

Content: rice demand, supply, price The record 1960-2015 2015: warning signs? Forecasting 2015-2030 What does it mean?

AN ASTONISHING ACCOMPLISHMENT USDA; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

50 KG PADDY/YEAR FAO, USDA; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

FROM 2.6% TO 1% FAO, USDA; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

COMPLACENCY (AGAIN)? Wall Street Journal markets, update July 30, 2013: “Asia's Rice Glut Expected to Worsen Good Harvests Loom, on Top of Already Burgeoning Supply” USDA Outlook, 2012: “In Southeast Asia, slowing production growth does not appear to threaten regional food security because consumption growth is also slowing” CGIAR Consortium CEO , dr. Rijsberman: “The world is overinvested in cereals…” 42nd meeting of the Committee on World Food Security in Rome, 2015

“Crippling drought brought on by the El Nino weather pattern could cut rice stocks among the world's top exporters to levels not seen since 2008, potentially fuelling a price crisis similar to one seen that year, an industry expert [Sam Mohanty] warned” Reuters, Apr 12, 2016 http://www.reuters.com/article/us-rice-asia-drought-idUSKCN0X90BT Reuters, Fri Apr 1, 2016: Philippine rice farmer killed as drought protest turns violent http://www.reuters.com/article/us-philippines-farmers-idUSKCN0WY3SV ORYZA; April 27, 2016: Rice Output in Indian Southern State Telangana to Decline Sharply in 2015-16 Due to Drought Time, July 16, 2015: Thailand is Suffering From The Worst Drought in Decades http://time.com/3960462/thailand-drought/ BBC, November 2, 2015: Drought hits Indonesia's rice farmers http://www.bbc.com/news/business-34705608

Thai 25% broken rice price $/t THE CRISIS Overseas Development Institute (UK), 2013: The more fundamental drivers of increased prices are the higher costs of fertilizer, diesel, and labor as rural wages rise in parts of Asia Thai 25% broken rice price $/t ? Data Source: FAO Rice Market Monitor & World Bank

COULD IT HAVE BEEN PREDICTED? Rice price crisis Complacency Again? Pingali 1997: complacency => risk crisis FAO: http://www.fao.org/worldfoodsituation/foodpricesindex/en USDA; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

OIL PRICE DRIVEN? Going up Going down WB Pinksheet, USDA; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

USE AND STOCKS Going down Going down USDA; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

THE IMMEDIATE CAUSE IN 2008: PANIC Export ban (India) Importing countries scramble (Philippines, Indonesia) Millers, traders, farmers hoard Lost market confidence Thin market (7% traded before 2008) Prices out of control

THE CONSEQUENCES BBC News, 11 April 2008; http://news.bbc.co.uk/2/hi/south_asia/7324596.stm

NOT ONLY RICE – NOT ONLY ASIA Mexico ; The Road to the Horizon, April 2008 Cape Town, 2008; Mail online 9 October 2011 Egypt; The Telegraph, 8 April 2008 Mogadishu; Africa on NBC News; 5 May, 2008

USE AND STOCKS, FAO APRIL 2016 World stocks-to-use ratio at 33.5 percent in 2015/16 Familiar? http://www.fao.org/economic/est/publications/rice-publications/rice-market-monitor-rmm/en/

CEREAL USE AND STOCKS, FAO MAY 2016 World stocks-to-use ratio from 24.9 % in 2015/16 to 23.4 % in 2016/17 Rice: down by 5 M t Wheat: down by 8 M t Coarse grains: down by 8 M t Familiar? http://www.fao.org/worldfoodsituation/csdb/en/

STOCKS EXPORTERS, FAO APRIL 2016 Stocks-to-use ratio at 18.1 % in 2015/16 Lowest since 2008-09 Forecast 2016-17: stocks-to-use ratio at 14.7 % India, Thailand, Vietnam, Pakistan, USA http://www.fao.org/economic/est/publications/rice-publications/rice-market-monitor-rmm/en/

Tadaa……

POPULATION (000) UN; http://esa.un.org/unpd/wpp/Download/Standard/Population/

GLOBAL PER CAP RICE CONSUMPTION Kg milled rice/cap ‘Disappearance rate’ Losses, animal feed, industry FAO; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm UN; http://esa.un.org/unpd/wpp/Download/Standard/Population/

AFRICA RISING Asia Africa Kg milled rice consumption/cap FAO; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

ASIA: UP OR DOWN? Or Philippines and Bangladesh? Follow Japan and Taiwan? FAO; through World Rice Statistics - http://ricestat.irri.org:8080/wrsv3/entrypoint.htm

Too biased? IRRI FORECAST Million tons milled rice Additional rice needed: 63 million tons by 2030 Mohanty; Estimated March 2016

IRRI FORECAST IN 2009 Million tons milled rice Actual vs Predicted

IRRI SCENARIOS Million tons milled rice Scenario 1: high population and low income scenario 2: low population and high income Mohanty; Estimated March 2016

ABDULLAH ET AL 2005 Kg milled rice/cap 70 60 50 40 30 20 10 Kg milled rice/cap 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Estimate of Rice Consumption in Asian Countries and the World Towards 2050. http://worldfood.apionet.or.jp/alias.pdf

ABDULLAH ET AL 2005 Milled rice (M t) 600 500 400 300 200 100 Milled rice (M t) 1960 1970 1980 1990 2000 2015 2030 2040 2050 Estimate of Rice Consumption in Asian Countries and the World Towards 2050. http://worldfood.apionet.or.jp/alias.pdf

ABDULLAH ET AL 2005 Milled rice (M t) 540 520 500 480 460 440 420 400 380 360 340 Sombilla 2002 FAO 2005 FAO 1995 Scenario 1 Scenario 2 Scenario 3 1990 1995 2000 2005 2010 2015 2020 2025 2030 Estimate of Rice Consumption in Asian Countries and the World Towards 2050. http://worldfood.apionet.or.jp/alias.pdf

TIMMER ET AL 2010 Long-run dynamics of rice consumption, 1960-2050. http://books.irri.org/9789712202582_content.pdf (pp139-173)

WHY SO WRONG? Rejesus 2010 Global data on rice consumption and income used in previous studies are nonstationary and not cointegrated Thus previous studies that forecast global rice consumption based on econometric models that fail to account for the appropriate data generating processes of global rice consumption and global income are misspecified Forecasting Global rice consumption. http://www.agecon.purdue.edu/staff/balagtas/rice_timeseries_v6.pdf

REJESUS ET AL 2012 Forecasting Global rice consumption. http://www.agecon.purdue.edu/staff/balagtas/rice_timeseries_v6.pdf

OECD 2015 Production Consumption Closing stock http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2015/world-cereal-projections_agr_outlook-2015-table59-en (Organization for Economic Cooperation and Development)

OECD 2015 Price Production Price: also going up! Consumption Overseas Development Institute (UK), 2013: More costly rice is a problem for poor and vulnerable groups that do not share in the benefits of economic growth http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2015/world-cereal-projections_agr_outlook-2015-table59-en (Organization for Economic Cooperation and Development)

Food Price Indices, FAO MAY 2016 “Current market fundamentals do not suggest a reversal in the downward price trends witnessed in most food markets, at least for the time being.” FAO Food Outlook BIANNUAL REPORT ON GLOBAL FOOD MARKETS, October 2015 http://www.fao.org/3/a-I5003E.pdf http://www.fao.org/worldfoodsituation/foodpricesindex/en/

..shifting supply-demand dynamics may put upward pressure on price formation which may be modified by downward trends in China’s economic development – of course adjusted for global GDP fluctuations… What does this all mean?

Consistent 50 kg/ha yield growth Continued strong global demand rice SUMMARY Consistent 50 kg/ha yield growth Continued strong global demand rice Rice price? FAO: down; OECD: up Risk of repeat in complacency Declining stock development; other fundamentals different from 2008 (oil) Trigger of crisis and panic reactions unpredictable

THANK YOU FOR YOUR ATTENTION

REJESUS ET AL 2012 Forecasting Global rice consumption. http://www.agecon.purdue.edu/staff/balagtas/rice_timeseries_v6.pdf