The Price of Rice

The price of rice is spiking due to tight global supply and export bans from countries around the globe. Malaysia’s Deputy Prime Minister Datuk Seri Najib Razak has repeatedly assured the public that there would be no increase in the price of rice.

Furthermore, the new Agriculture and Agro-based Minister Datuk Mustapa Mohamad has stated that the stockpile of rice in the country is sufficient to cater for the needs of the people.

Malaysia’s subsidy on rice do not come cheap for the government over the years. According to the Information Department, rice subsidies has increased from Rm800 million in 2006 to Rm900 million in 2007.

Subsidies generally distort the true price of the rice in the market. Similar to price controls, people tend to consume more because the price of rice is cheap. Farmers on the other hand, would not increase their rice production because it is less profitable.

Should the subsidies be removed, farmers would plant more rice (as it is now profitable) and people would consume less rice. Both scenarios would then help to push down the price of rice as there is more supply and less demand.

Subsidies may also result in unintended consequences like black markets and smuggling as traders and merchants seek to maximize their profits and escape the price controls.

Top Rice Producers (million tonnes)

Country 2006/2007 2007/2008*
China

127.8

129.5

1.7

India

93.4

94

0.6

Indonesia

33.3

34

0.7

Bangladesh

29

28.4

-0.6

Vietnam

30

30.6

0.6

Thailand

22.9

23.3

0.4

Myanmar

10.6

10.7

0.1

Philippines

10

10.4

0.4

Japan

7.8

7.93

0.13

Brazil

7.7

7.9

0.2

Total

372.5

376.73

4.23

Source : USDA Foreign Agriculture Service

Note : *up to March

Top Rice Consuming Countries (million tonnes)

Country 2006/2007 2007/2008*
China

127.8

127

-0.8

India

86.9

89.9

3

Indonesia

35.6

36.2

0.6

Bangladesh

29.8

30.1

0.3

Vietnam

18.7

18.7

0

Philippines

11.6

12

0.4

Myanmar

10.6

10.7

0.1

Brazil

8.7

8.9

0.2

Japan

8.3

8.5

0.2

South Korea

4.7

4.8

0.1

Total

342.7

346.8

4.1

Source : USDA Foreign Agriculture Service

Note : *up to March

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