Tuesday, 2 March 2010

The price of rice

As grain prices rose at the beginning of 2008, triggering the food crisis, India, like many countries, banned rice exports. The ban, which began in April 2008, did not apply to basmati rice, which is long grain, aromatic and fetches about twice the price of non-basmati on export markets. More than 70 per cent is exported to Gulf countries and about 12 per cent to the EU. India raised the minimum export price of basmati rice from $1,1000 to $1,200 per tonne.

Simultaneously, representatives from the Indian Ministry of Commerce and Industry met with the United Arab Emirates (UAE) Minister of Economy HE Eng Sultan Bin Saeed Al Mansouri. The goal of the meeting was to strengthen bilateral trade between the two countries, including increased UAE investment in India’s infrastructure including food processing, and an assured supply of basmati rice from India to the UAE, which imports about 300,000 tonnes of basmati rice per year from India, Thailand and Pakistan.

Ever since, UAE has piled on the pressure to cut basmati rice prices. India lowered the minimum export price of basmati to $900 per tonne in September 2009 to compete with lower cost basmati from Pakistan. In the UAE the price of rice plunged by 35 per cent January 2009, then by 15 per cent in the three months to April 2009. Many traders were offering an extra kilogramme of rice for every two purchased, which makes a minimum export price ineffectual.

Yet UAE demand for non-basmati rice is falling. The main consumers of this cheaper rice are the migrant workers from India and other South Asian countries in camps providing cheap labour for the construction boom. These camps have reduced their provision of free food in order to cut costs. There have been many reports of rates of pay too low to send money home, strikes, deaths from heat and exhaustion, suicides and malnutrition in camps, such as this from The Times in 2007. This photo gallery in the Guardian newspaper gives a glimpse of conditions for migrant labourers in Dubai. Since then, migrant workers have been at the sharp end of the recession. In March 2009 it was reported that some construction firms have cut labourers’ meals from three to one per day. The UAE Ministry of Labour itself reports overcrowding with up to 40 per cent more workers crammed into camps to cut costs, violations of labour law including late payment, reduction in wages, unpaid leave and termination of service without required end of service benefits.

India’s rice yields for 2009 are down, largely because of a weak and late monsoon, the worst monsoon since 1972. India’s ‘year of drought’ may reduce rice yields by about 18 per cent. Bad weather has also affected rice yields in the Philippines and Latin America, which may trigger a surge in prices to record levels. India might import 3 million tonnes of rice in 2010.

Yet India’s basmati rice exports for 2009-2010 are set to surpass the 2,100,000 tonne export target set by the Agricultural and Processed Food Products Export Development Authority (APEDA), an increase of about a third over the previous year. Basmati rice has coped better with the drought as the crop requires less rain than non-basmati varieties and copes better with late rain. But the crop also benefits from government support in assuring water for irrigation. APEDA Chair Asit Tripathy stated his confidence that exports will unaffected by drought as basmati rice areas benefit from access to underground water sources, and paying for a consultant to conduct an annual satellite survey of basmati rice growing areas.

Yet again, the Indian government’s food export drive takes priority over feeding hungry people, and the countries importing the Indian produce appear to have the upper hand in leveraging lower prices. My previous post about India’s food export drive as 200 million go hungry requires updating, as the estimates are rising. Vandana Shiva, calls India the ‘hunger capital of the world ’ noting that 214 million people, one in four, go hungry in India. And outside India's borders, many of the migrant workers in UAE, about 1.5 million were from India in 2008, are also at risk of hunger.

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