1. ANALYSIS OF RICE PRICE TRENDS: Where are the Price Spikes Coming From?
Isabelita M. Pabuayon and Agham C. Cuevas
Professor and Dean, and Associate Professor, respectively, CEM-UPLB
NAST Social Sciences Division Science Information Forum on Rice
Sufficiency: Price Rise and Importation Issues held on November 26, 2014 at the La Breza Hotel, Quezon City

2. Presentation Outline Introduction
Overview of the Rice Market – Philippines, World
World Rice Price Trends
Philippine Rice Price Trends
Marketing-related Issues

3. Introduction
Interrelated issues – rice self-sufficiency, food security and price stability
Price stability – related to demand, supply and trade
Domestic supply – local production + imports
Domestic demand – food consumption and other uses
Supply and demand lead to price formation
Price affects consumers’ willingness to buy and
producers’ willingness to produce and sell
Food security is the bottom line – food is available, accessible and affordable to all at all times

4. The Philippine Rice Market 1) Consumers
Rice staple food for 80% of 100 M Filipinos
Comprises 20% of the poor’s consumption value
Annual per capita consumption declined from 119 kg in to 114 kg in 2012
Extremely poor (110 kg) < AB upper class (123 kg)
Lower than other ASEAN countries, but higher than global average

5. Annual per capita consumption trending at 1
Annual per capita consumption trending at 1.67% / year, rising aggregate consumption, thus imports

6. Lower than other ASEAN countries, but higher
than global average

7. The Philippine Rice Market 2) Producers
Rice is major crop for 2.4 million Filipino farmers with average farm size of 1.14 hectares
Net farm income PhP / ha / cropping season (BAS)
Irrigated
Non-irrigated
All Farms
Net income
24,680
15,750
21,910
Prod cost PhP / kg
11.15
11.78
11.29
Yield kg / ha
4,271
3,058
3,885
Price
PhP / kg
16.93

8. The Philippine Rice Market 3) Intermediaries
Market intermediaries consisting of traders at the farm, wholesale and retail levels
Perform marketing services - transportation, storage, processing (milling), packaging, grading and standardization, wholesaling and retailing
Incur marketing costs, entitled to normal returns from capital, labor, management and risk-taking
Marketing costs + profit affects price level

9. The World Rice Market Global rice output - 476,557,000 MT
Global rice trade - 41,169,000 MT
- 8.64% of global output
Top 10 producers
Top 10 exporters
Top 10 importers

10. Top 10 rice producers (85.59% share)
Country
Output (1000 MT)
% Share
China
142,530
29.91
India
106,540
22.36
Indonesia
36,000
7.55
Bangladesh
34,390
7.22
Vietnam
28,000
5.88
Thailand
20,460
4.29
Myanmar
11,957
2.51
Philippines 8th
11,858
2.49
Brazil
8,300
1.74
Japan
7,832
1.64

11. Top 10 rice exporters (92% share)
Country
Export (1000 MT)
% Share
India
10,000
24.29
Thailand
9,500
23.08
Vietnam
6,500
15.79
Pakistan
3,900
9.47
USA
3,100
7.53
Myanmar
1,300
3.16
Cambodia
1,000
2.43
Uruguay
930
2.26
Brazil
840
2.04
Egypt
800
1.94

12. Top 10 rice importers (42.08% share)
Country
Import (1000 MT)
% Share
China
3,500
8.50
Nigeria
3,000
7.29
Iran
1,650
4.01
Philippines 4th
1,450
3.52
Indonesia
1,400
3.40
Iraq EU
1,350
3.28
Saudi Arabia
1,325
3.22
Cote d’ Ivore
1,150
2.79
Malaysia

13. Philippine Rice Industry Performance

14. Philippine Rice Industry Performance
3.43 % / year
3.40%
5.11%
5.17%

15. Philippine Rice Industry Performance

16. World Price Trends
4.31% / year

17. World Price Trends

18. World Price Trends
March – April 2008 > US$1,000 / MT

19. 2007-2008 Rice Crisis (Factors)
Price build-up prior to 2006 due to demand > supply: high income growth, increasing population, weather disturbances, dwindling stocks
Rice price increase linked to increasing prices of wheat and corn, rising oil prices
Government actions and ‘rational panic’ among key players, media reporting, official announcements by international organizations of price rise forecast – created uncertainties and market jitters (Dawe & Slayton 2010)

20. 2007-2008 Rice Crisis (Factors)
Export ban of India for non-Basmati rice on Oct 9, 2007, setting of minimum export prices, outright ban in April 2008
Export ban of Vietnam in early 2008 until June 2008
Large tenders made by the Philippines with Vietnam in March and April and agreement to pay higher than world prices
MOU of Philippines with Thailand in May for more rice deliveries

21. 2007-2008 Rice Crisis (Factors)
Thailand’s announcement of export ban although did not materialize
Thailand’s proposal to put up a rice exporter cartel (the Organization of Rice Exporting Countries or OREC that includes Vietnam, Cambodia and Myanmar)
Announcement of Malaysia and Nigeria to stockpile although did not materialize
Export suspension of Egypt until April 2009 and export ban of Cambodia and Brazil in April 2008
Delayed issuance of export quotas by China

22. World Price Trends
Declining
- 0.87% /month

23. Trends in Philippine Rice Prices
Steady increase in domestic prices, 6.33% per year

24. Trends in Philippine Rice Prices
Domestic prices (Pd) 50% higher than world prices (Pw)
Pd constant or increasing while Pw falling

25. Stock levels and domestic prices
Year
Beg Stocks (1000 MT)
Pr WMR (PhP/kg)
Pr RMR (PhP/kg)
2010
3,137
34.34
30.84
2011
3,010
34.73
31.31
2012
2,212
35.30
32.08
2013
2,175
36.87
33.70
2014
1,994
42.02
38.76
Declining stocks, rising prices

27. Stock level and domestic price correlation
Pr WMR
Pr RMR
NFA
Commercial
0.0601
0.0680
Household
Negative relationship between NFA stocks and
retail prices of well-milled and regular milled rice

28. Prior to 2011, NFA stocks are greater than commercial
Types of Rice Stocks
Prior to 2011, NFA stocks are greater than commercial
and household stocks

29. Steady increase in prices in 2013 sustained in 2014
Highest price PhP21.87 in June 2014

30. Highest price PhP38.61 in July 2014

31. Highest price PhP40.99 in July 2014

32. Highest price PhP40.59 in August 2014

33. Highest price PhP43.64 in September 2014

34. Marketing-Related Issues
The study of Dawe et al (2006) that compared marketing margins in the Philippines and Thailand concluded that margins are higher in the Philippines and marketing costs explain one-fourth of the difference.
Marketing cost is higher because of
1. road quality which increases transport costs
2. seasonality and lack of openness to trade, making storage time longer
3. inefficient financial services, which increase the cost of money.

35. Marketing-Related Issues
The other three-fourths of the difference may be explained by too many marketing agents
Consistent with the large numbers of business entities licensed by the National Food Authority (NFA) to do business in rice
No evidence of collusion was found from farm to wholesale and at the retail level
Collusion at the wholesale level could not be proved or ruled out due to inadequate data

36. Thank you very much.