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

2. 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

3. Content: rice demand, supply, price
The record
2015: warning signs?
Forecasting
What does it mean?

4. AN ASTONISHING ACCOMPLISHMENT
USDA; through World Rice Statistics -

5. 50 KG PADDY/YEAR
FAO, USDA; through World Rice Statistics -

6. FROM 2.6% TO 1%
FAO, USDA; through World Rice Statistics -

7. 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

8. “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,
Reuters, Fri Apr 1, 2016:
Philippine rice farmer killed as drought protest turns violent
ORYZA; April 27, 2016:
Rice Output in Indian Southern State Telangana to Decline Sharply in Due to Drought
Time, July 16, 2015:
Thailand is Suffering From The Worst Drought in Decades
BBC, November 2, 2015:
Drought hits Indonesia's rice farmers

9. 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

10. COULD IT HAVE BEEN PREDICTED?
Rice price crisis
Complacency
Again?
Pingali 1997: complacency
=> risk crisis
FAO:
USDA; through World Rice Statistics -

11. OIL PRICE DRIVEN? Going up Going down
WB Pinksheet, USDA; through World Rice Statistics -

12. USE AND STOCKS Going down Going down
USDA; through World Rice Statistics -

13. 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

14. THE CONSEQUENCES
BBC News, 11 April 2008;

15. 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

16. USE AND STOCKS, FAO APRIL 2016
World stocks-to-use ratio at 33.5 percent in 2015/16
Familiar?

17. 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?

18. STOCKS EXPORTERS, FAO APRIL 2016
Stocks-to-use ratio at 18.1 % in 2015/16
Lowest since
Forecast : stocks-to-use ratio at 14.7 %
India, Thailand, Vietnam, Pakistan, USA

19. Tadaa……

20. POPULATION (000)
UN;

21. GLOBAL PER CAP RICE CONSUMPTION
Kg milled rice/cap
‘Disappearance rate’
Losses, animal feed, industry
FAO; through World Rice Statistics -
UN;

22. AFRICA RISING Asia Africa Kg milled rice consumption/cap
FAO; through World Rice Statistics -

23. ASIA: UP OR DOWN? Or Philippines and Bangladesh?
Follow Japan and Taiwan?
FAO; through World Rice Statistics -

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

25. IRRI FORECAST IN 2009
Million tons milled rice
Actual vs Predicted

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

27. ABDULLAH ET AL 2005 Kg milled rice/cap 70 60 50 40 30 20 10
Kg milled rice/cap
Estimate of Rice Consumption in Asian Countries and the World Towards

28. ABDULLAH ET AL 2005 Milled rice (M t) 600 500 400 300 200 100
Milled rice (M t)
Estimate of Rice Consumption in Asian Countries and the World Towards

29. 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
Estimate of Rice Consumption in Asian Countries and the World Towards

30. TIMMER ET AL 2010
Long-run dynamics of rice consumption, (pp )

31. 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.

32. REJESUS ET AL 2012
Forecasting Global rice consumption.

33. OECD 2015 Production Consumption Closing stock
(Organization for Economic Cooperation and Development)

34. 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
(Organization for Economic Cooperation and Development)

35. 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

36. ..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?

37. 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

38. THANK YOU FOR YOUR ATTENTION

39. REJESUS ET AL 2012
Forecasting Global rice consumption.