Rice Crisis: What Is Happening?

By International Rice Research Institute

The rice crisis: What needs to be done? A background paper by the International Rice Research Institute (IRRI)

The rice crisis is a major concern for half the world's population. This paper explains the reasons behind the rapid increase in rice prices and what must be done to achieve reliable, plentiful supplies of affordable rice.

What is happening?

The poorest of the world’s poor are the 1.1 billion people with income of less than a dollar a day. Around 700 million—almost two-thirds—of these people live in rice-growing countries of Asia. Rice, the dominant staple in Asia, accounts for more than 40% of the calorie consumption of most Asians. Poor people spend as much as 30–40% of their income on rice alone. Ensuring sufficient supplies of rice that is affordable for the poor is thus crucial to poverty reduction. Given this, the current sharp increase in rice price is a major cause for concern.

The Green Revolution in Asia, which began in the 1960s with the introduction of modern, high-yielding rice varieties, led to a rapid rise in both rice yields and overall production. This contributed to poverty reduction directly through increased income for rice farmers and indirectly through lower prices for rice, which benefited poor consumers in both rural and urban areas (Figure 1).



Fig. 1. Trends in world production and real price of rice, 1961-2008

However, this long-term decline ended in 2001, with the rice price taking a sustained upward turn since then. The price continued to rise throughout 2007 and has sharply increased in the first quarter of 2008 (Figure 2). The world price of Thai rice, 5%-broken—a popular export grade—in December 2007 was $362 per ton but almost tripled to around $1,000 per ton at the end of April this year (see Figure 2).



Fig. 2. Monthly export price (US$/ton FOB) of Thai rice 5%-broken, 1998-2008 (March 1998 to March 2008)

Major exporting countries such as Vietnam and India have announced different forms of export restrictions to protect their domestic consumers. These restrictions have further contributed to the recent increase in rice price as the rice supply in the world market has dwindled. While exporters are holding on to their stock of rice, importers are rushing into the market to buy more rice to meet their consumption needs and to build their own stock. Hoarding by traders for speculative purposes has added fuel to the fire in some countries. The market shortages and rise in price have now reached a crisis point, with recent quotes for rice price being as high as $1,000 per ton. Food riots have occurred in several countries and soldiers are guarding food trucks to prevent looting.

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