Tuesday, May 06, 2008

Who's afraid of the "organization of rice exporters"?

Who’s afraid of Orec or the supposed “organization of rice exporting countries”? Well, importers including the Philippines seem to have been rattled by the news but the fact is that Orec is a dumb idea. We should better laugh it off. Why?

First, those countries on the Mekong like Thailand and Vietnam just cannot store rice forever. Unlike oil, rice deteriorates in just a few months of storage in the warehouse. And the Thais and the Vietnamese could eat only so much rice.

In fact, forming Orec is counterproductive for these rice exporters. When they hoard their own rice, local prices decline, thus hurting their own farmers. If they want to benefit from the current situation, it’s in their best interest to sell rice and not hoard it.

Besides their geographical advantage of having the Mekong River and extensive sources of irrigation water, the main incentive why farmers are producing more rice in these countries is the fact that they are able to sell in the global market place. There’s money in rice exports. Once their governments remove that incentive through export restraint, that incentive would be gone and farmers might just shift to other more profitable crops.

Forming that cartel would be tantamount to shooting themselves in the foot. The only real beneficiaries of Orec are the rats and bugs that will have an ample supply of rotting rice in Vietnamese and Thai warehouses.

1 comment:

Anonymous said...

With organization and management the positives for "hoarding" could bring sense to the turbulence in supply and prices, and in real sense to the evolving food crisis.

"Being afraid is" and not is psychological and short of posturing.

The food crisis in mind, land otherwise used for paddy could be utilised for other food production, a kind of productive "rice planting holiday". In addition, rice storage has improved tremondously due gains in storage research work on other cereals.

The open market is not absolutely the answer to everything. The reality is, government regimes can pull down (and be pulled down) those in power. All you need is some fund devils with money/ dollar signs in iris of their eyes.

+++rice is nice+++