Rice under threat
At a time when food prices are rising and millions are going hungry, one of the most fundamental foodstuffs across the globe – rice – is under threat. Nowhere is rice more important both culturally and economically than in Asia. The Pesticide Action Network Asia and Pacific, which in 2003 launched its ‘Save Our Rice Campaign’, provides a background into how the stage for hunger was set decades ago and how current global financial and economic systems are worsening the situation for poor farmers across Asia and undermining food security.
2008 is a year that has been marked by ‘food riots’ – for Asia, this has mainly been over the severe shortage and rising prices of its staple food: rice. The price of rice in the global market shot up by an unprecedented 34 per cent in February, which was immediately reflected in local markets worldwide.
The World Bank has reported that global food prices have increased by 75 per cent since 2000. In many rice-producing and consuming regions, particularly in Asia, rice has led the general food inflation, with ripple effects on the retail prices of other basic foodstuffs.
Rice prices reached record levels in May 2008, but have since tempered. This can be seen in the Food and Agriculture Organization (FAO)’s all rice price index, which by July had lost 9 per cent from its peak in May and which continued to decline in August. The Thai 100 per cent B-grade white rice, the benchmark for global trade, fell to an average of $796 per ton FOB (free-on-board) in August from $963 per ton in May. But the August 2008 average was still 80 per cent higher than the prices in January and 138 per cent higher than the $335 per ton the year before. And the retail prices of rice in domestic markets – those actually paid for by the consumers – have not gone down at all since January 2008.
Exporters, namely China, India, Egypt and Vietnam, have implemented export taxes, export quotas, export bans or minimum export prices in order to protect their local markets and ensure their own supplies. This has led to importing countries such as the Philippines and Indonesia panic buying, which has aggravated the situation.
What has caused such turmoil to this traditional crop that is not only crucial to the food security of so many nations but also the source of income for millions of rural people?
What is happening to the major staple for more than half of the world’s population? What has caused such turmoil to this traditional crop that is not only crucial to the food security of so many nations but also the source of income for millions of rural people?
Definitely, supply and utilization are not the issues. According to the United States Department of Agriculture (USDA), rice production has been increasing by 2.2 per cent and consumption by 1.8 per cent every year since 2003. Even looking at the annual ending stocks comprising 18 per cent of production, it is obvious that there is rice available for everyone. So what’s the problem? The FAO is blaming a narrowing global market, the rising cost of oil and consequently farm inputs, climate change, and the doubling of global demand for rice.
However, the global market for rice was narrow to begin with and should not be that influential in the affordability and availability of rice in the local markets. The narrowness is attributed to factors inherent in the crop – production is dependent on the timing of the Asian monsoon (for Asian production) plus type and quality are highly stratified and leave no room for substitution – all are sources of production risks and price volatility, which do not fit the workings of a global market.
But a narrowing global market should not be reason enough for such steep, across-the-board price increases as those we are witnessing today. Only 6 per cent of global rice production ends up in the global market, with the remaining 94 per cent being consumed by the producing countries themselves, which means that the production and consumption of the staple is very much local. So, why is there is a rice crisis? To understand this, one must first be clear that the world food crisis is not a circumstantial phenomenon but one of a systemic and structural nature. The stage for the current devastating state of affairs actually began to be set with the Green Revolution.
Setting the stage for hunger
The ‘Green Revolution’ (GR) is the so-called ‘modern’ agricultural system which was introduced in the 1960s and 1970s in various developing countries, replacing the traditional system of agriculture practised by millions of farmers for generations.
It was based on the use of a very narrow range of ‘high-yielding varieties’ of seeds, growing single crops (monocrops) on large tracts, and heavy inputs of water, chemical fertilizers and pesticides. Although it raised production substantially, especially of wheat and rice, this was only for a short period and it came at a heavy cost. Chemicals degraded the land and poisoned the water sources, fields turned saline, and ground water levels dropped because of the intensive use of water. Meanwhile, costs of farm inputs escalated and incomes fell, particularly for small-scale farmers who, with their limited asset base, were driven deep into debt and in many cases displaced. Moreover, the impacts of pesticides on health and the environment have been devastating. An estimated 10 per cent of the 1.2 billion farmers and agricultural workers have been poisoned and many others chronically diseased.
The monocrop system and the chemicals also destroyed the diverse supplementary food crops, the edible wild crops and aquatic life (crabs, shellfish and other fish) that thrived in and along the rice fields and near the farms. These were important secondary sources of food for the poor farmers, especially in times of food shortages. With these gone and debt rising, hunger and malnutrition increased in rural areas, particularly among women and children.
By the 1990s, a slowdown in farm productivity and severe environmental damage had become a general phenomenon in many developing countries. In Asian countries, for instance, average productivity growth rates for the two periods 1977-86 and 1987-97 dropped from 3.35 per cent to 1.5 per cent for rice, from 6.21 per cent to 2.96 per cent for wheat, and from 4.04 per cent to 3.34 per cent for corn.1 There has been a further decline since.
Leaving aside China, the number of the hungry in the rest of world increased by 11 per cent. In South Asian countries, both per capita food availability and the number of the hungry actually rose by 9 per cent.2
Ironically, the International Rice Research Institute (IRRI) was largely responsible for propagating the Green Revolution in rice and thus for its devastating effects on small rice farmers everywhere. Closely linked with agrochemical and seed transnationals, it is now promoting a ‘Second Green Revolution’, namely the use of genetically engineered seeds. These are the modern-day version of the failed high-yielding varieties of the first GR and they are a serious threat to human health, the environment and the food sovereignty of small rice farmers.
Globalization and trade liberalization
In the 1980s, many developing countries were forced to implement neoliberal policies through the World Bank/International Monetary Fund’s structural adjustment programmes (SAPs) followed by the poverty reduction strategy programme. In agriculture, the new policies essentially meant giving up self-sufficiency in food and a shift in priority from growing food crops to cash crops for exports. If the Green Revolution was generally mediated by the state and state agencies and, prodded by the international finance institutions, through public provision of seeds, fertilizers, and irrigation, and directing research and development, SAPs were marked by the withdrawal of the state in all these spheres.
After 30 years of globalization, 70 per cent of Majority World countries have become net food importers
Production has been stunted by globalization policies imposed on the rice-producing countries in the name of free markets. Globalization has expedited the erosion of rice self-sufficiency and the natural economy of the Majority World, increasing their food import bills and resulting in continuously shrinking local agricultural production. After 30 years of globalization, 70 per cent of Majority World countries have become net food importers.
The unequal premise of trade liberalization, where First World countries led by the US and the EU have retained large parts of their agricultural subsidies and high tariffs while Majority World countries have started off without domestic support and with only quantitative restrictions in place, has resulted in gross injustice. Cheaper rice imports have flooded rice-producing countries and competed directly with their high-cost local production.
Privatization has also become a conditionality of Innovation Funding Initiative (IFI) lending, where poor rice-producing countries have been told to privatize rice trade and public stockholding ostensibly in order to manage their IMF/World Bank debts and make the rice trade more competitive. For a long time, the global rice trade was either through government-to-government contracts handled by public bureaus or through a few private Chinese exporters – it was mainly an intra-Asian affair. But with the policy of privatization, agricultural transnational corporations, not necessarily of Asian origin, developed rapidly and at one point controlled 40 per cent of the global rice trade. This has resulted in unbridled rice importation even by rice-producing countries with sufficient stocks and production.
In Thailand, for instance, private trading has risen over the past 10 years from 20 per cent to 80 per cent of total trading. In Vietnam, private negotiators have also become more visible. Most of the major Asian public bodies still manage exports but now sell through private exporters who are in direct contact with private importers in Europe, the Middle East, and Africa. Most of the public stockholders and market regulators have been reduced to allocating import quotas to private traders in their respective countries.
Furthermore, many governments of rice-producing countries have defaulted on price and production subsidies, public stockholding and marketing, distribution and even seed and genetic resources conservation. They have also relegated to the market crucial issues such as agrarian reform, agricultural extension services, and infrastructure.
The stalled WTO talks have also led to the mad frenzy for bilateral agreements between countries on liberalization of not just trade but also foreign investments, outside the rules of the WTO. Bilateral agreements with major agro-exporters such as Australia, Canada and the US have opened the rice markets of poor countries to low-cost imports. Meanwhile, although the favourite destination of foreign investment is natural resources extraction, the production of high-value crops or export crops is also attracting foreign investment, especially through corporate farms or corporate takeover of plantations, which are elbowing out rice and food production.
Speculating and profiteering
Globalization has financialized rice and allowed speculation on its actual price. All these feed transnational profits while sending Majority World farmers to bankruptcy, impoverishing the people, and trampling upon people’s food rights.
Global profits have been pooled together and invested in financial instruments including derivatives, called futures, whose prices depend on the changing value of the product they represent – in this case food. This is called financialization – an activity whereby the values of commodities rather than the actual commodities themselves are traded in the futures market. The commodity now becomes the object of speculation – an activity that does not require the actual buying and selling of the commodity but simply the estimation of its future price. The problem is that this is done outside production realities, yet the eventual price is reflected in the real markets. Wheat, soy bean, corn, oats, rice and others are currently being traded in the futures markets by non-commercial players, that is, investors who are not part of the food industry.
According to the Toronto Globe and Mail, the amount of speculative money in futures like rice has ballooned from US$5 billion in 2000 to US$175 billion in 2007. The upsurge in speculative investments has made prices more volatile and divorced prices from the realities of production. And, as the world is witnessing, these funds have had substantial clout in the market, all because the rice market is narrow, rice production is in crisis, and the globalization of rice has been relentless.
Large transnational agribusiness corporations, which have come to dominate world agriculture and food markets, have been licking the cream off the market and making enormous profits
On the other hand, large transnational agribusiness corporations, which have come to dominate world agriculture and food markets, have been licking the cream off the market and making enormous profits. Cargill, the world’s largest food grains dealer, which had 36 per cent higher profits ($ 2.3 billion) from commodity trading in 2007 over those of 2006, saw its profits increase by 86 per cent in the first quarter of 2008 (compared to the same period the previous year). Archer Daniel Midlands (ADM) of the US, the world's second largest grain dealer, saw its profits grow by 67 per cent to a record $2.2 billion in 2007. Bunge (US) saw a 49 per cent higher profit ($738 million) in 2007 from its grains trade; according to the company, it was a ‘unique time’ for agribusiness. This is despite the fact that only about 10 per cent of the food produced in the world is traded internationally – 18 per cent of the wheat, 8.6 per cent of the corn and 7.4 per cent of the rice in 2007-08. The US leads wheat and corn exports and is a major rice exporter as well.
Seed and pesticide companies are also profiting enormously. The world's largest seed company, Monsanto, pocketed a profit of nearly $1 billion in 2007 (44 per cent more than in 2006), and Syngenta, the world's top pesticide company and third largest seed company, had 75 per cent higher profits ($1.1 billion) in 2007. Expecting a more receptive market following the food crisis, both companies are now pushing genetically modified (GM) seeds, also heavily promoted by IRRI. Food processors and the world's large retail traders, such as Walmart (US), Tesco (UK) and Carrefour (France) are the other beneficiaries.3, 4, 5
The recent global financial turmoil, with the US economy as its epicentre, brings to the fore the parasitism of finance capital and the devastation wrought by financial liberalization and deregulation.
Meanwhile, Majority World farmers remain landless; their production, backward; and their resources, monopolized by the rich and the transnationals. Relations in production are exploitative, compounded by neglectful governments that would rather support elite interests than uplift farmers’ lives.
Rice has great symbolic significance for many societies. Besides being the main staple for some three billion people, it is deeply entrenched in their cultures and traditions. It cannot be subject to the greed of global traders and transnationals, IFIs and multilateral institutions, speculators and capitalist parasites. Rice, and with it, the food sovereignty of Asia and the Majority World, must be reclaimed by the people if we are ever to find a way out of this madness.
- Kaosa-ard et al, 1999, cited in The Green Revolution and IRRI, Kilusang Magbubukid ng Pilipinas (KMP), in Rice Panicles, PAN AP, 2007
- Peter Rossett, Lessons from the Green Revolution, Food First Backgrounder, Mar/Apr 2000
- GRAIN, Making a killing from hunger, April 2008
- Subudh Verma, Agribusiness booms amid food gloom, The Times of India, 4/6/08
- Nidhi Nath Srinivas, Commodity majors milk volatile markets, The Economic Times, 21/5/08
Read more on the threat to rice in China and India: Lorena Luo from Greenpeace's Beijing office debunks the idea of a New Green Revolution in her article The Solution That Wasn't.