Accessing Rice Markets in the Context of Global Soaring Inputs and Food Prices:

Challenges and Opportunities for West Africa.

FAO REGIONAL WORKSHOPS ON RICE AND AQUACULTURE FOR PRODUCTIVITY INCREASE &

MARKET DEVELOPMENT IN WEST AFRICA23-27 March 2009, Burkina Faso, Ouagadougou.

ADAMA EKBERG, Ph.D. Commodities, WTO and Trade Related Issues

Email: adamaekberg.coulibaly@fao.orgMobile: (233) - 248939236

FAO Regional Office for Africa, Accra, Ghana

Plan

1- Context of current west African food markets & prices 2- What has caused rice prices to increase since 2000 ?3- Can the global high food prices be converted into increased intra rice regional trading opportunities ?4- Conclusion and way forward

What is the West African food markets current situation ?

Cereal production for 2008/2009 in the CILSS and West Africa countries is estimated to reach 56 378 000 tons, up 3 % relative to the forecasts released in November 2008 (governments/CILSS/FAO/FEWS NET) , up 17 % relative to the registered 2007 cereal production(cf. CILSS, March 2009, Cotonou):

BF (+36%), CV(+278%), Gambia (13%), Guinea B.(32%), Mali (+4%), Mauritania (38%), Niger (47%), Senegal (147%), Chad (2%); CILSS (31%); Benin (12%), COT.IV.(10%), Ghana (8%), Lib. (11%), Togo (7%), Guinea (12%), Costal states (11%), UEMOA (30%); ECOWAS (17%) (cf. AGRHYMET).

A record rice production is registered this year in Sahel with 2670 000 tons, up 44 % from the 2008 levels with mixed performance: Burkina Faso (+241%), Gambia (+101%), Niger (+85%), Senegal (76%), Mauritania (+59%), Chad (+51%).

Context of current and west Africa food markets ?Context of current and west Africa food markets ?

A paradox of high food production and high prices…

Are the west African cereal markets integrated ?

Are the current rice markets prices high?

Are rice markets accessible to the poor ?

In all markets, observed cereal markets prices are well above, between 15 and 35 %, the levels registered last year at the same period. The prices of local cereal prices (millet, sorghum, maize) reached exceptionally high level at moment where ones expect in between seasonal drop between the harvests of October 2008 and February 2009.

Today, the high prices levels of imported rices for example prevent most of vulnerable population to substitute for rice for their daily intake. Note that up to June 2008, the bullish observed trends refer mostly to rice and wheat, the two major imported cereal in the region.

In recent months, cereal prices started to recede in world markets after reaching their spikes of 2008 but more recently the world markets registered some increase again in January relative to their December 2008 levels with wheat (+7%), maize (+8%) and rice (+5%) suggesting West africa to prepare for a period of food price volatility at a relatively high price level zones ahead.

Context of current and west Africa food markets ?Context of current and west Africa food markets ?

A paradox of high food production and high prices…

What has caused food commodity prices to increase What has caused food commodity prices to increase since 2000 globally ?since 2000 globally ?

Rising living standards in PRC, India and other rapidly growing developing countries (increase demand for improved diets ( vegetable oils, livestock products and the feedstuffs to produce them)

Mandates for corn based ethanol in the us (and biofuels from vegetable oils in Europe) causing ripple effects beyond the corn economy

Massive speculation from new financial players searching for better returns than in stocks or real estates has flooded in commodity markets

What the layers causation at play

Rapid depreciation of the dollar against the euro and some other important currencies drives up the price of commodities quoted in dollars for both supply and demand reasons

Underneath all these demand drivers is the high price of petroleum and other fossil fuels.

it is useful to think about the factors causing high food price in terms of cumulative layers of causation.

Five basic driver seem to be stimulating rapid growth in demand for food commodities including rice

What has caused food commodity prices to increase What has caused food commodity prices to increase since 2000 globally… ?since 2000 globally… ?

The world rice price is very thin, currently trading just 6-7% of global production (4-5%, 1960s-1970s) i.e global rice market is subject to large price moves from relatively small quantity moves.

As concerns grow in 2007 that world food supplies were limited and prices for wheat , corn and vegetable oils were rising, several Asian countries (Philippines) reconsidered the wisdom of maintaining low domestic stocks of rice or exporting rice with no restrictions (india, thailand, vietnam)

Bad weather (draught, disease) such as in 2007 for wheat harvest in India, as in other parts of the globe: lead to substitute of rice for wheat; ban on rice exports in sept 2007, by feb 2008, an outright ban on non-basmati rice exports were in place. India 3rd largest rice exporter , supply 4.1 mil tons in 2007); PANIC: as rice price rises, other exporters such as Thailand (1st rice exporter, 10.0 mil. In 2007) put export restraints as well.

The rice difference

The global rice market is also relatively concentrated, with Thailand, Vietnam, India, US and Pakistan providing four fifths of available supplies making rice a political commodity.

These actions by two large rice exporters caused prices to jump to $750 per tin on 28 march 2008. prices continue to surge breaking $1100/ton in April. All because of panic.

Dwindling global stock have generally been recognized as the major trigger for the rise in food prices, and indeed rice consumption have been signicantly outstripping production since 2000 (fig.13). Since 2005, there has been just small increases in the rice stock-to-use ratio. As a result, since july, Gvts in Malaysia, Philippines, Indonesia announced plans to double to triple gvt-held buffer stocks.

for rice the story is more complicated.

the causal link are many and difficult to dealt with in the short run

What has caused food commodity prices to increase What has caused food commodity prices to increase since 2000 locally…?since 2000 locally…?

West Africa population is high and growing rapidly along with income: RCI/Nigeria

Uncoordinated governments responses to the food soaring prices: export bans, disparate rice tariff policies (TEC); speculation (8 local currencies) and panic.

High degree of global high price transmission to domestic economies (consum/produc)

Some current and future major external factors/drivers at play ?

Dietary changes and tastes is changing with rapid urbanisation

Supply side capacities remain constrained with uncertain climate, fuel, fertilizer costs

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419375

177 191202

619578

290258

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100

200

300

400

500

600

700

Nord Ouest Est &corne del'Afrique

Centre Sud

Source: Population reference bureau, USA.

2005

2025

2050

Population Outlook by Africa sub regions, in millions 2005-2050

West Africa population (39 % of total Africa), followed with East Africa to become most populous sub regions by 2020 with more than 60% urban. OECD, 2007

What tariff barriers affect west African rice markets ?

ECOWAS CET structured along 4 product categories (I, II, III, IV) with bands (0 %; 5%; 10%; 20%)+ additional country level taxes (Nigeria: 100%).

Proposed 5th tariff band for sensible products: 50 % (Nigeria, RCI) under discussion

Possible compromise between 20 % to 50 %,

possibly 35 % against Benin (15%), RCI (20%); Nigeria (50%), Ghana (20%).

Many obstacles to rice trade do exist but conditions are improving

What has caused food commodity prices to increase What has caused food commodity prices to increase since 2000 locally…?since 2000 locally…?

Disparate future CET schemes to hinder intra regional rice trade

What non tariff measures affect west African rice markets ?

High tariff barriers affecting rice markets integration

What has caused food prices to increaseWhat has caused food prices to increase

Since 2000 locally ?Since 2000 locally ?

Rice less likely coming from other Africa sub regions

Source : UNCTAD Trains in WITS, 2006

HS code   COMESA ECCAS ECOWAS AMU EAC SADC SACU

1006 Rice 3.7 7.4 13.3 32.2 9.4 2.2 0.0

110230 Rice flour 11.7 10.0 20.0 36.6 19.0 15.0 20.0

West Africa is rice focused in Africa but its MFN applied tariffs in force are among the highest in Africa

What has caused local rice prices to increaseWhat has caused local rice prices to increaseRice less likely to come from other African sub regions…

Other constraints affecting food markets integration Export restrictions Ethiopia, Madagascar, Malawi, Sudan, Tanzania, Zimbabwe,

(India, Vietnam, Thailand)

Increase supply using foodgrain stocks Ethiopia, Sudan, Swaziland, Tanzania, Zambia

Price controls/consumer subsidies Ethiopia, Madagascar, Malawi, Sudan, Tanzania, Zimbabwe

Reduce taxes on food grains Angola, Burundi, Cameroon, DRC, Ethiopia, Gabon, Lesotho, Madagascar, South Africa, Sudan, Tanzania, Zambia, Zimbabwe

Governments responded to the recent food soaring prices in an unprecedented manner with insufficiently cordinated measures, sometimes inconsistent with existing trade related commitments.

What could cause keep future rice prices high? What could cause keep future rice prices high?

rooms for further rice price increases ?

High population growth globally and locally

High rice price volatility with emerging climate change, increasing water shortage for irrigation

Some opportunities to increase rice prices ahead

Global food market uncertainties with low rice stock to use ratio globally

Changing consumer demand (dif. in food preferences/ diff in culture, high income)

World food (rice) prices receding but expected to increase in the longer run

world rice stock-to-use ratio to remain low

Source : FAPRI, 2009. www.fapri.missouri.edu

Source : FAPRI, 2009. www.fapri.missouri.edu

High co movements between domestic retail prices and imported prices, GHC/kg, Ghana,

Jan – Dec 2008

Overall price trend: Complete departure from 2006 and 2007. Clear extraordinary price hikes beginning in April/May.Causes1. Except for Millet and Cassava the other staples experienced steep price rises between May and July, as a result of the extra ordinal increases in global fuel and inputs prices. Prices fell slightly in July (at the beginning of the harvest in southern Ghana) and then assumed a plateau format there after. 2. The 50%-subsidized fertilizer which was received by farmers in June 2008 came too late for the 2008 crop production and does not appear to have influenced production.

Source : MOFA, 2009

High price co movements between domestic prices and imported prices, CFA/kg, Senegal, oct 07 to sept 08

Source : MOFA

Source : FAPRI, 2009. www.fapri.missouri.edu

Converting food crises into increased intra rice Converting food crises into increased intra rice regional trading opportunities ?regional trading opportunities ?

Potential for rice in intra regional food trade ?

though global, local rice markets remain in crisis, real opportunities remain to increase trade within and between Africa sub regions subject to removing expeditiously underlying several intra regional food trade impediments

COMESA ECCAS ECOWAS AMU EAC SADC WAEMU

Rice 63-74% 75%+ 75%+ 75%+ 63-74% 63-74%75%+

THP THP THP HP HP VHP

Source: COMTRADE, 2005 ; HP High Potential ; VHP Very High Potentiel

There are high trade intensity potential for accelerating intra regional rice trade in West Africa

COMESA ECCAS ECOWAS AMU EAC SADC WAEMU

Rice 63-74% 75%+ 75%+ 75%+ 63-74% 63-74%75%+

VHP VHP VHP HPHP

Converting global food crises into trading opportun. Converting global food crises into trading opportun.

What can we do for west Africa rice developers ?

Priority areas for actions

To expand west Africa rice markets = Need to better harmonize rice policies + coordinate rice projects

Implement rice product status policy Promote and protect rice as a sensitive food product

• increase Africa rice productivity and competitiveness thru a value chain development approach (simult.action • accelerate harmonization of rice policy framework, coordination and eliminate intra regional trade barriers sustain rice policy support at the highest political level

provide support for adequate rice financing,

developper des chaines alimentaires performants support appropriate rice technology transfer, R&D, infrastructure

innovative capacity building of beneficiaries (farmers)

What can we do to improve rice markets access ? What can we do to improve rice markets access ?

What can REC do?

Better Harmonization

Effective Coordination are key

Fast tracking process needed

the explicit and proactive development of common rice polices and laws (and consequent surrender or derogation of national sovereignty) as opposed to mere convergence or compatibility needed

From this perspective, the greatest obstacle to improved rice market integration is the insistence among many member states on retaining national sovereignty over important matters, such as agricultural policy and fiscal measures.

Rice policies integration and coordination are prerequisites for the rice markets access improvement. No rice markets integration without rice policy integration