The History About The Global Rice Production

Published Date: 02 Nov 2017

INTRODUCTION

Introduction

In the early 90s, global rice production expanded at a rate of 1.8 percent per year. By the end of the decade, it reached 400 million tonnes (Mt) in milled equivalent. Developing countries hold for about 95 percent of the total, where half of the world output comes from China and India. Most of the increase in the 1990s was sustained through productivity gains rather than land expansion. Recently, the tendency for yield growth to slacken has been cause for concern. Furthermore, competition for basic resources like land and water from other agricultural and non-agricultural sectors, as well as the negative environmental impacts associated with rice cultivation, are expected to pose a serious challenge to the future development of the sector.

During the 1990s, global trade in rice expanded on average by 7 percent a year to about 25 Mt. Despite having a dynamic growth, the international rice market remains thin, covering for only 5 to 6 percent of global output. Unlike other bulk commodities, the international rice market is segmented into a large number of varieties and qualities, which are not easily interchangeable because of strong consumer preferences. Ordinary indicia rice are the most commercialized which covers almost 80 percent of international rice then followed by aromatic rice at 10 percent, medium rice at 9 percent and glutinous rice at 1 percent.

Background

Rice is the primary staples for more than half the world's population, consuming largely in Asia and Africa regions. Developing countries have long depended on rice's versatility and high caloric value. Rice consumption is declining in Northeast Asia like Japan and Taiwan but continues to rise of Philippine and Indonesia in Southeast Asia, South Asia around India, Bangladesh, and Africa.

Rice is produced worldwide and is the world's second largest staple crop, behind corn. Rice production, prior to milling, is about the same as total wheat production. Although rice is produced over wide areas of the world, the physical requirements for growing rice are limited only to certain areas. Economically sound production typically requires high average temperatures during the growing season, a plentiful supply of water applied in a timely fashion, a smooth land surface to facilitate uniform flooding and drainage, and a subsoil hardpan that inhibits the percolation of water.

Problem Statement

In rural population, rice is considered as the essential food and a core necessity as well as their food security. Rice is also a wage commodity for workers in the cash crop or non-agricultural sectors. This has given rise to conflicting policy objectives, with policy-makers intervening to save farmers when prices drop, or to defend consumer purchasing power when there are sudden price increases.

Rice is vital for the nutrition of much of the population in Asia, as well as in Latin America and the Caribbean and in Africa; it is central to the food security of over half the world population. Rice is therefore considered a strategic commodity in many countries and is, consequently, subject to all sorts of government controls and interventions.

Developing countries are the main players in the world rice trade, accounting for 83 percent of exports and 85 percent of imports. The concentration is particularly high on the export side, since five countries; Thailand, Vietnam, China, the United States and India cover about three-quarters of world trade. This situation is in contrast to the fragmentation of import markets and the wide year-to-year fluctuations in individual countries’ purchases, resulting from the fact that importers do not rely consistently on the international market for rice supplies, but only as a last resort to fill the gap caused by a production shortfall. Unlike for other important cereals, there is no major international future market for rice.

LITERITURE REVIEW

From (Diouf, 2005) in his statement that food security is essential to sustainable livelihoods and to maintain a peaceful environment. In this regard, rice plays a vital role in fighting hunger and promoting stability. Rice is the staple food for over half of the world’s population. Almost a billion households in Asia, Africa, and the Americas depend on rice-based systems as their main source of employment and livelihood. Rice is the most rapidly growing food source in Africa. About four-fifths of the world’s rice are produced by small-scale farmers in developing countries, and are consumed locally.

(Khush, 2005) found from his research that rice production increased 130% from 257 million tons in 1966 to 598 million tons in 1999. Average rice yield increased from 2.1 to 3.9 t ha–1 during the same period. In 2000, average per capita food availability was 18% higher than in 1966. Whereas rice production increased at 3.0% and 2.5% per annum during the 1970s and ’80s, respectively, the increase was only 1.5% during the 1990s. During the last four years, production has been stagnant. According to the International Food Policy Research Institute, rice production must increase 38% by 2025 to feed 4 billion rice consumers.

From (Dorosh, 2001) stated that there are substantial difference in terms of overall importance of rice between Bangladesh and India. As in India, there is no single food grain dominates the food consumption there compared to in Bangladesh. Rice accounts for about 72.8 percent calories consumption in Bangladesh whereas in India only 33.3 percent of calories consumed. On the other hand, study by (Braun & Bos, 2005) found that although the average share of total calories originating from rice has remained fairly constant during the last three decades for the world as a whole, in Asia this share has fallen from 38% to 31%, primarily due to diversification of diets caused by urbanization and increasing incomes. Within Asia, it is notable that the share of calories from rice has declined in China and Japan but this trend is not observed in other Asian countries; instead, the share of rice has remained fairly stable. In Africa, however, the share of rice in total food consumption is growing. The world’s biggest consumer of rice is China, followed by India and Indonesia. While Asia has been and continues to be the main consumer of rice, consumption in other regions of the world is increasing.

(Chung, Pingyi, & Yuan-yun, 2009) and (Lee & Lee, 2009) believe that the rice industry are protected by the government through various market intervention programs such as price support and import quotas, for several reasons. Among the reasons are first because rice was the most important agricultural venture both in terms of farming acreage and rural employment. Second, producer’s income was far below the average of nonagricultural sectors. They represented an economically weak but politically influential group that politicians could never ignore. Finally, and most importantly, paddy fields generate a variety of external benefits such as better natural environment, food security and conservation of the traditional culture, where none of which can be captured by profits, consumer surplus or tax revenue.

From an article (Mishra, Pratik Parija & Prabhudatta, 2012) After China, India is the largest rice grower which ready to compete with Vietnam as the world biggest exporter after favorable weather and higher government prices boosted the harvest. According to US Department of Agriculture, Vietnam export rise to 7 million metric tons more than double 2.8 million in the year 2010- 2011. After India ban three years on export of non-basmati varieties, the prices reached the highest and cause 18percent decrease on the staple food. Prices will remain under pressure for the following months because of demand exceed the global production on the eighth year. That will extend the global cost for the food for the first time in April. There is possibility for India in becoming the largest exporter said Mohanty. A good harvest will allow the country to export next year and the crop will be higher because of the yield increase. Since the ban was scrapped, exports of non basmati varieties exceeded 4 million tons and India will represent 21 percent of global trade. Global paddy productions are expected to increase to 1.7percent in the year 2012. Thai Prime Minister tried to increase the farmer income through state purchase since taking power in August has slowed down the export and creates opportunity for India and India price is cheaper than the Thailand price.

(Business Recorder, 2012) Pakistan has exported 3.025 million tons of rice which 0.725 million tons of Basmati and 2.3 million Irri-6 and other varieties. According to Javed Aslam Chairman Rice Exporters of Pakistan, Pakistan has export almost the same quantity of commodity this year as last year.

He said export on Basmati has declined 10 percent but export on Irri-6 and others increased 15percent against last year. The total current exports of Basmati are around $800 million and non-basmati is $920 million. The total production of rice in current year is 6.9 million tons while total consumption is 2.8 million tons which Pakistan has 3.5 million tons surplus rice for export.

(Business Day, 2012) Asia rice prices will stay firm this week due to large purchase from Nigeria and China. Shipping delays of India rice to Nigeria prompt buyers to turn to Thailand, increase price of Thai rice 1percent to $620 per ton. Kiattisak Kalayasirivat said Thai price will stay firm for few month as it seems like Nigeria will continue to buy more.

Nigeria is Thailand’s biggest buyer of rice importing some 1 million to 1.5 million ton annually but has fall when India resumed exports of the grain. Thai rice price are unlikely to fall short due to a government intervention scheme but export volumes are lower because prices are now at uncompetitive levels. Vietnam appears set to overtake Thailand as the world’s top exporter. Price of rice rose to $440-$445 a ton due to strong demand from China. The strong demand for China push up the price but China’s buying pace is not stable.

From an article (Dai, 2012) Conference is held to discuss on ways to increase and improve production in the country’s largest rice growing region. Although 90 percent of rice exported from the country but the live of people does not improved. This is due to lack of communication between farmers, scientists and export companies. They need to develop long term strategies for Vietnamese rice and help build a brand in global market. According to Dr Pham Van Du, deputy chief of the Department of Cultivation, farmers, scientist and export companies need to cooperate with each other to improve rice exports.

Farmers need to be able to predict the market production and consumption. Farmer continues to produce low quality of rice which does not have many buyers. Vietnamese rice is competing with low quality varieties from India, Pakistan, Myanmar and Cambodia hence it is difficult to maintain its traditional markets.

(Rice News Export, 2012) Rice export declined due to the rice mortgage scheme implemented by Pheu Thai Party. A drop of 41 percent on Thailand exported rice. This declined is due to the mortgage price offered by the government’s rice pledging scheme is higher than the market price. The government is paying 15000 baht a ton for rice paddy mortgage scheme while market price is around 10000 baht per ton. Even Thailand is the top rice exporter; the country is still in no position to set prices in the world market. The prices in Thai are higher than the price in Vietnam.

The Thai rice Miller Association predicted that Thailand would lose it status as the world’s top rice exporter as Vietnam is expected to export as much as 8 million tons while it appears Thailand is not capable of achieving such a feat. Mr Nipon said, price should not exceed 80percent of the selling price. Democrat MP for Phitsanulok Warong Dejkijwikrom said the pledging scheme is opens to abuse and irregularities.

Mr warong said he had received complaints on farmers being exploited by rice millers. Farmer do not have a choice when it is time to sell and some agreed to sell below the set prices to buyers who show up at their farms so they do not need to pay for transportation costs. And some rice miller pledge their own paddy under farmer’s names. They pay to use farmer’s rights to mortgage their output.

From (Reuters, 2012) Thailand remains as the world’s top rice exporter by selling up to 7.5 million tons this year and 8.5 million ton in 2013 and prices has increased due to government intervention scheme. Thailand has become world’s top rice exporter since 1983 but it is losing it spot because of the rice purchase scheme which their rice is expensive than grain from the competitors Vietnam and India. As a result, export were 44percent lower than a year ago but would still be able to sell more rice than any other country this year and next year.

(Rice News Export, 2012) The FAOs rice price for March shows that after declining trend in export prices of Pakistani rice over few months, a mild recovery was seen in export prices of the Pakistani variety in March this year. A slight increase in the rice prices from Thailand and Pakistan has shown a marginal improvement in March. For Pakistan, export price increased only for the Irri- pak variety and Basmati rice remain the same.

FAO attributes this improvement in prices of Pakistani rice to increased demand from China, which has beefed up rice imports to contain its domestic prices. Globally prices of rice in March have declined for most of FY11. This is plausibly due to an improved global rice production outlook. For Pakistan, rice production is expected to be over 30percent higher than last year. Initially in FY12, export prices of Pakistani rice had been higher relative to the previous year, owing to floods in Thailand in the former few months of FY12 that helped keep up international prices.

(Centre for International Trade Studies, 2011) Rice is one of the most important in Thailand’s economy. It is the staple food of Thais and it is their principal source of foreign income. Rice also becomes the main source of income for more than 3.7 million households out of total 5.6 million from the agricultural households. Besides that, rice is also the main export of Thailand’s to the neighbouring country in ASEAN such as Myanmar, Vietnam, Singapore and Cambodia. Vietnam is Thailand’s strongest competitor as they produce rice in large quantity and sells to the same international market as Thailand. Even though Thailand is the first world exporter for rice, however in the ASEAN market, Thailand is number two behind Vietnam for rice exporter.

Unfortunately, Thailand will receive less benefit because Vietnam is controlling the price of rice in the ASEAN market. Therefore, Thailand has to find an alternative and find ways to use the agreement that will give more benefit them. But according to most of the Thai farmers, they do not even know what the ASEAN Economic Community agreements say. Only a few of them understood what the ASEAN Economic Community, consequently, the Thais have to take the lack of understanding as a priority to them. It is also because when they have the enough knowledge to understand the agreement; it is easier for you to follow the agreement.

The effect of the rice custom duty decrease in the ASEAN Economic Community will be explained in the two cases which is every country in ASEAN decreases its custom duty to zero immediately and each country in ASEAN decreases the customs duty to zero by 2015 according to the agreements. The explanations of the two cases are as follows.

Firstly, every country in the ASEAN must decreases is custom duty to zero immediately. When this happen, it is expected that the GDP for Thailand will increase to 0.02% but when compared to the Vietnam, it can be seen that the total GDP of Vietnam can increase to 0.2% which is more that the Thailand’s GDP growth.

Secondly, each country in ASEAN decreases its custom duty to zero by 2015 according to the agreements. When the custom duty is decreases by 2015, it is foreseen that the GDP growth of Thailand just 0.004% while the growth rate for Vietnam is 0.03%. Consequently, when the tax is decreases, it will favor more the Vietnamese rather that the Thais as the Vietnam will receive more benefit and have more GDP growth rate that Thailand.

Furthermore, according to the Free Trade Agreement in Thailand and Vietnam, Thailand will be able to expert more rice to other countries. The market where the Thais export the most which is Philippines, where the growth rate will be expected to be 35.70% and their second market is Indonesia with a growth rate of 25.31%. However, when we compare the growth rate between Thailand and Vietnam, it is shown that Vietnam has a bigger export growth rate in the Philippines as 116.0% which is approximately three times more than the Thailand growth rate. Even though the rice custom duty decrease, this will affect the overall Thailand export growth rate but there are certain market which are the Singapore and Brunei that Thailand experiencing a decline export growth rate since both of the country already have zero custom duty rate.

There is also a side effect of decreasing the rice tax by the ASEAN Trade agreement which is the household income of the farmers. For case 1, every type of tax decreases to zero immediately, so the Thai farmer income can increase by 15.12% of their total household income and also the income of the non-farmers also increases by 84.88% of the total household income. For case 2, the custom duty decreases to zero by 2015 according to the agreements, the impact on the Thai farmers’ income will increases approximately by Bhat1009 per household and for the income of the non-farmer also will be increase by Bhat5665 per household.

As a conclusion, Thailand has a strong competitor in exporting rice which is Vietnam. It is because Vietnam exports their rice in a large quantity and they also have the same market as Thailand. Vietnam is also a big name for exporting rice for some of the countries especially in the Philippines and Malaysia. Thus, when the custom duty of rice decreases under the ASEAN Free Trade Agreement, consequently it will give an impact to the Vietnam as they will be receiving more benefits compared to Thailand in terms of production, export and farmers’ income. On the other hand, the Thai farmer still lack of understanding of the opening free trade issue. Therefore, they have to take actions that will give benefit to them as well as preparation for the operation.

From (Prabhu Pingali, 1993) Myanmar was a major exporter in the mid-1960s currently witnessed the downfall of its export over the last two decades. It is belief that the cause that leads to this downfall is the liberalization of rice export policies. In the 1988, this is the period of the post policy reform. The reform is focusing more to crop choice decision, compulsory procurement and internal trade. Even though, these reforms are giving the producers some incentives, productivity growth still at a decline rate since there is restrictions imposed by macro-policies and the decentralized institutions. Myanmar exported 2-5 percent of their annual paddy production that total up to 13-14 million tons.

The policy reform of the crop choice, there are large areas only restricted to rice. So the farmers are limited to grow only rice in the programmed land but they are given a choice to grow non-rice crop in the non-program areas. The downside of this reform is the dry season. During the dry season, the farmers are more prefer to grow non-rice crops since they can grow them as many quantity as they prefer even though the government is pushing for an expansion in the production of rice during the dry season.

Before the downfall of the rice production in Myanmar, government provides subsidized fertilizers, agro-chemicals and mechanical services and since the year of 1992, Myanmar also begins to import machines. Unfortunately, the drastic fall in the foreign aid to Myanmar cause the decline in the supplies of fertilizers, agro-chemical and machines. Besides that, private fertilizers importers did not emerge until 1992. Furthermore, before the removal of the import restrictions in 1992, there were a large scale diversion of fertilizers and other input supplies for the rice plantation.

After the policy reforms, the main season crop which is rice decline about 15 percent. The Myanmar Agricultural Product Trading Company (MPAT) will provide 30 kyats per basket as the acquired quota as advance payment in July. The farmers receive more payment from the private trades by 150 kyats per basket compared to the government that paid them only 50 kyats per basket. So the tax for the production of rice is 10 percent from the gross revenue. The main problem now is the summer rice that the government is trying to encourage the farmers to produce it as a new program crop. Even though officials said there is no quota requirement but the farmers still think the quota is applied even to the summer rice.

The inter-divisional trade was opened to the private sector after the reform policy in 1988. It is also known as the internal rice trade. The private traders’ main interest is in moving rice into Yangon and lead to traders look to Mandalay as the price-forming center. During this time also, supplying to the government personnel is also allowed per employee each month at the lower price which is the quarter form the market price. The rice in the government system is in its poor quality than the private traders’ rice as the compulsory procurement system does not specify any quality requirements.

The rice exportation is monopolized by the government since the end of 1988. So, the private rice traders must apply for licenses for each export shipments. Consequently, these traders can benefit freely from the foreign exchange earnings. However, the government requires the exporters to use part of this foreign exchange to import items that currently short supply in the domestic market. This requirement leads to discourage exports as there are many complaints about it.

So, what is the potential for future exports for Myanmar? Their domestic price for rice is one-third to one-quarter lower than the world rice price. So the production of rice from the complete liberalization of rice exports would be 2.25 million tons. Moreover, the effect of the government’s implicit tax on compulsory procurement cannot be included. It is cannot be determine because the subsidization of the various inputs such as the fertilizers, agro-chemical and machines. It is expected to be smaller than the export ban.

In a nutshell, the complete liberalization of Myanmar’s rice sector can lead to an increase in the country’s rice export. Myanmar has the ample land capacity that is spare for rice which is absolute area and area of the expansion production. Thus, the government can set up a consistent production once the ‘prices are right’. So by improving the price incentives has to be parallel by the infrastructural investment especially for milling and small scale watering.

(Hoh, 2012) Rice production of milled rice increases to 1.7 million tons in the year of 2011 despite the fact ‘La Nina’ had caused some damage in the first two months of 2011. Fortunately, the government of Malaysia provides the aid for the farmers in the form of fertilizer, insecticides and repairing the drainage and irrigation systems in the rice producing area in the northern Peninsular Malaysia. Farmers have to plan more during the off-season due to the ‘La Nina’ and they are also able to contribute to the production in the harvested area in the year 2011.

The direction for 2012 is more on the positive side. In the long run, the government is encouraging a large scale production for the private sector especially in Sabah and Sarawak where there are abundant lands. The domestic consumption of rice in Malaysia increased 3.8 percent to 2.7 million in 2011. Besides that, it is predicted that in 2012, it will increase about 4 percent as demand also increases by an in-flow foreign workers and tourists. The domestic consumption per capita is about 72 to 75 kg and in relation to the consumption of wheat over the last two decades.

The imports for the rice production increase in 2011 and are expected to continue it increment in 2012. The government of Malaysia also ensures that the supply of rice will be sufficient to all consumers. During the year 2012 and 2013, it is forecast that imports will decrease again as the authority take action in stocking up the supply of rice.

Vietnam has been the leading rice supplier for Malaysia since 2009 because the Vietnam rice is much cheaper than the Thais. Besides that, Vietnam has about most of the market share which is 55 percent in Malaysia and the Vietnamese traders prefer the Malaysian payment term and ports’ efficiency. Moreover, Pakistan is one of the suppliers for Malaysia followed by Cambodia and India. Thailand made an intervention rice scheme and leads to an interruption for the price in the market.

The rice traders hoarded rice to sell to the government at the intervention price which is $550 per tons in the early February 2012. Padiberas Nasional Berhad (BERNAS) had signed a memorandum of understanding with the Vietnam government in October 2011, for a guarantee annual supply of rice to Malaysia. BERNAS was also a sole importer for another 10 years from January 2011 until July 2021.

Under the Ninth Malaysia Plan (NMP), the government of Malaysia adopted the policy to increase the self-sufficiency to 90% in rice production by 2010. The result for this goal not achieved due to lack of land available for the production of rice.In order to make an achievable goal for the production of rice, in the Tenth Malaysia Plan (TMP), the government dropped the 90 percent self-sufficient target rice production and the government will provide the availability of food especially rice for the general population.

So, in order to guarantee supply of rice, the government prepares a stockpile at 292000 metric tons or it is estimated to sustain consumption for 45 days by entering a long-term contract to import the rice. Moreover, the government also wants to increase the production of the rice by improving the existing paddy areas through upgrading the infrastructure.

In other words, the government wants to focus only to the production and utilize it without developing a new area for the rice plantation. Furthermore, the rice farmers will be given a subsidy of RM25 per 100 kg of paddy delivered to a licensed mill or drying facility.

(Khan, 2012) Pakistan has engage a bilateral trade agreement with Malaysia but it is seems to show that the bilateral trade are more favoring Malaysia compared to Pakistan. It is because Pakistan’s share of the trade only $257 million from the total of $ 2.8billion, the remaining goes to Malaysia. So, in order to remove the gap differences, Pakistan has to export rice, mangoes and beef to Malaysia.

Furthermore, Pakistan is 12th biggest producer of rice and fourth biggest exporter of rice in the world due to their best and fine quality of rice. In addition, since Malaysians consume a lot of rice especially the basmati rice which is around eight to nine percent of rice, they can export more than the percentage needed. It will result in an aggressive export.

Malaysia has become a centre of knowledge for the higher education level and it is shown in the current number of Pakistani students which is 200 students that studying here and taking their undergraduate and postgraduate education. The Pakistan’s government is interested to invest in this sector and will be sending more of their citizen to pursue their higher education level study in Malaysia. Malaysia’s tourism sector is also a vibrant industry after manufacturing because it is the second highest contribution in revenue that total up to $1 billion and by the year 2020, it will increase to $3 billion.

The Pakistani also compliments the Malaysian government because they are very active in the charity work or humanitarian assistance. When Pakistan is affected by an earthquake in 2005, Malaysia government is there to provide the aid to ease their difficulties during the natural disaster.

As a conclusion, Pakistan and Malaysia are great countries but they need increase their bilateral trade volume of $2.8billion so that the bilateral trade agreement not favouring only one side of the party.

(Jason Szep Reuters, 2012) Myanmar was known as Burma when the country was under the military management and it want to revive the fact that they used to be the world’s biggest rice exporter in the 1960s. The dream to regain the status is not impossible as they can do it before and why cannot be it now? Even though it is a lot to achieve but the government is starting to draft plans to achieve this goal. Furthermore, the economy of Myanmar is an agricultural-based economy including farms, fisheries, forestry and livestock which total of 43 percent of gross domestic product.

In order to reclaim their status as the top rice exporter, the government has to give main priority to the rice farmers, so that they are provided with the facility that can increase the production of the rice such as high quality seeds that are funded by the multinationals from seed production Company named Monsanto Co and DuPont Co's Pioneer Hi-Bred seed unit. One of the production seed company, particularly DuPont Pioneer is interested to invest in the opportunities offered in Myanmar.

In the future, it is expected that Myanmar will increases it export in a large quantity as much as 2 million tons next year, 2013 and by the year 2015 it will goes up to 3 billion tons. Although it expects exports are going to double to 1.5 million tons, it may be decline 23 percent due to the increase supplies from other rice producers according to the U.S Agriculture Department. Besides that, the government is setting up banks for the rice farmers who are struggling with debt.

This approach is taken from Indonesia where banks are set up to provide credit or loan to small farmer but the bank is not control by the state. This bank is called MyanmaAgro-business Public Co that has 76 shareholders and agriculture development banks (ADCs) are included in it. The ADCs are run by the wealthy local that specialized in the micro-financing. Unfortunately, after the ADCs lending $100 million to the farmers, they are not thriving to make the land prosperous. The government has to take actions to this problem by providing the appropriate infrastructure for them in agriculture and a realistic exchange rate and not just by giving credit. Thus, this measure is needed to be done.

(Wall Street Journal, 2012) The five major exporter of rice in the South East Asia region namely are Thailand, Myanmar, Vietnam, Laos and Cambodia are trying to cooperate and aimed to increase rice price as well as their exporting revenues. This step could cause pressures to the rice-importing countries. Unfortunately, in order to create this alliance would be a challenge for them since they are not well to cooperate and as a result the rice price hardly increases for this year. The cooperation of these five countries are aim to give out information to each other in terms of production and marketing. Their purpose of this cooperation is to increase the rice export prices. They aimed to form the cooperation by the end of the year 2012.

The top leaders of the rice exporters, Thailand and Vietnam commonly control almost half of the global rice trade but their combined share might be declining as India has become the world’s biggest exporter according to the International Grains Council that based in London. India has become the biggest competitor to both of the country because the Indian government has terminated the three and a half year ban on export of the ‘ordinary’ rice. So, if the future of this alliance is bright, they have to put Vietnam on board. Vietnam took an action by decreasing its own export prices due to the India’s terminating the ban on export while Thailand influenced other exporters to maintain the high prices.

In addition, certain people are in doubt that such actions took by them can really work. If they continue to increase the rice price, it could to a worldwide protest since everyone is starving. In the meantime, current price for rice is been relatively stable because they abundant stocks and great crops in exporting countries. The prices could be change sooner or later because of the drought season that affect may part of India and inconsistent seasonal weather in the South East region. The experts expected that the price of Thailand’s broken white rice to increase even without the help of the planned cartel.

In Thailand point of view, the government is paying the rice farmer higher than the market price in one of their expensive program in order to improve the rural area income and they are not preferred to increase the production of rice in the market by decreasing its prices. As a result, their stockpile has risen more than 16 million tons. It seems that their goal to increase the prices of rice might not be successful because Indonesia is a major rice importer. Consequently, Indonesia and also Philippines which both of them are the traditional importers feel that the world’s rice market prices are not reliable and it can cause threats to them.

As a conclusion, the plan to form an alliance between those five countries is likely to be result in a failure since it is not agreed by the ASEAN organization. It can also be misleading information to say that it is the ASEAN plan.

RESEARCH METHODOLOGY

For this study, secondary data was collected at the website of United States Department of Agriculture for World rice trade (milled basis): Exports and imports of selected countries or regions. All collected data was being referred to USDA, Foreign Agricultural Service, Production Supply and Distribution (PS&D) and Grain: World Markets and Trade, (Grain Circular). The data was chose and sort by alphabetical order and only 10 countries was selected based on the complete data and information of the chosen countries.

To analyze the data, Shift Share Analysis (SSA) was used to determine the growth of rice export market of the selected countries (refer Table 1). In SSA, two type of period of time was compared, which is Initial period and Terminal period. Initial period consist of year 2005 until 2007 while in terminal period it consist of year 2008 until 2010 data.

By using Microsoft Excel, calculation was made and data was analyzed by final finding of the calculations. All steps will be shown in Finding and Analysis.

Table 3.1: World rice trade: Exports of selected countries or regions (‘000’000 tonnes)

Country

2004

2005

2006

Initial Period

2007

2008

2009

Terminal Period

Argentina

249

348

487

1,084

436

408

594

1438

Australia

131

52

317

500

190

48

17

255

Brazil

37

272

291

600

201

511

591

1303

Burma

130

190

47

367

31

541

1052

1624

Cambodia

300

200

350

850

450

500

800

1750

China

880

656

1,216

2,752

1340

969

783

3092

Egypt

826

1,095

958

2,879

1209

750

575

2534

Guyana

243

182

250

675

210

210

250

670

India

3,172

4,687

4,537

12,396

6301

3383

2150

11834

Japan

200

200

200

600

200

200

200

600

Republic of Korea

105

400

91

596

161

0

4

165

Pakistan

1,986

3,032

3,579

8,597

2696

3000

3000

8696

Thailand

10,137

7,274

7,376

24,787

9557

10011

8570

28138

United States

3,052

3,841

3,260

10,153

3003

3219

2992

9214

Uruguay

804

762

812

2,378

734

742

926

2402

Vietnam

4,295

5,174

4,705

14,174

4522

4649

5950

15121

Total Export

28551

30370

30482

83,388

33248

31149

30463

88836

Table 3.2: Rice Export of Selected Countries (‘000’000 tonnes), Highest to Lowest

Country

Initial Period (2004-2006)

Thailand

24,787

Vietnam

14,174

India

12,396

United States

10,153

Pakistan

8,597

Egypt

2,879

China

2,752

Uruguay

2,378

Argentina

1,084

Cambodia

850

Guyana

675

Brazil

600

Japan

600

Republic of Korea

596

Australia

500

Burma

367

TOTAL EXPORT

83,388

Table 3.3: Rice Export of Selected Countries (‘000’000 tonnes), Highest to Lowest

Country

Terminal Period (2007-2009)

Thailand

28138

Vietnam

15121

India

11834

United States

9214

Pakistan

8696

China

3092

Egypt

2534

Uruguay

2402

Cambodia

1750

Burma

1624

Argentina

1438

Brazil

1303

Guyana

670

Japan

600

Australia

255

Republic of Korea

165

TOTAL EXPORT

88,836

Table 3.4: Rice Export of Selected Countries (‘000’000 tonnes), Highest to Lowest

Initial Period and Terminal Period

Country

Initial Period

Terminal Period

Thailand

24,787

28138

Vietnam

14,174

15121

India

12,396

11834

United States

10,153

9214

Pakistan

8,597

8696

Egypt

2,879

2534

China

2,752

3092

Uruguay

2,378

2402

Argentina

1,084

1438

Cambodia

850

1750

Guyana

675

670

Brazil

600

1303

Japan

600

600

Republic of Korea

596

165

Australia

500

255

Burma

367

1624

TOTAL EXPORT

83,388

88,836

FINDING,ANALYSIS AND DISCUSSION

A. Actual Change

The formula of Actual change, Vj = Vj, t – Vj, t

Country

Initial Period

(1)

Terminal Period

(2)

Actual Change

(2-1)

Argentina

1084

1438

354

Australia

500

255

-245

Brazil

600

1303

703

Burma

367

1624

1257

Cambodia

850

1750

900

China

2752

3092

340

Egypt

2879

2534

-345

Guyana

675

670

-5

India

12396

11834

-562

Japan

600

600

0

Republic of Korea

596

165

-431

Pakistan

8597

8696

99

Thailand

24787

28138

3351

United States

10153

9214

-939

Uruguay

2378

2402

24

Vietnam

14174

15121

947

TOTAL EXPORT

83388

88836

5448

Table 4.1: Actual Change (‘000’000 tonnes)

Analysis on Actual Change

If Vj :

 Greater than (>) 0, therefore the export value of rice on the particular country

experienced an increase.

 Equal to (=) 0, therefore the export value of rice in the particular country remained unchanged.

 Lower than (<) 0, therefore the export value of rice in the particular country

experienced a decline.

By referring to Table 4.1 of actual change, there are six countries experiencing a decline in their rice export (refer Table 4.2)

Country

Initial Period

(1)

Terminal Period

(2)

Actual Change

(2-1)

United States

10153

9214

-939

India

12396

11834

-562

Republic of Korea

596

165

-431

Egypt

2879

2534

-345

Australia

500

255

-245

Guyana

675

670

-5

Table 4.2: Country Experienced a Decline in Export (‘000’000 tonnes)

Eventhough United States is among the top five World’s rice exporters, it is seen in the table that export of rice from the United States is declining in recent years. The same goes to India where it is ranked as the third rice exporters in the world, but the export of rice from India is also declining.

B. Total Growth Rate

K = Total Value for each country for terminal period

Total Value for each country for initial period

K = 88,836

83,388

K = 1.065333141

By referring to Table 3.4, total export value for all countries in Terminal Period is 88,836 (‘000’000 tonnes) while the total export value for all countries in Initial Period is 83,388 (‘000’000 tonnes).

Thus, the total growth for each contry is 1.065.

C. Expected Value

E(Vj.t )= K(Vj,t-1)

The expected export value of rice in each countries at the terminal period, E(Vj.t ), is the actual export value of initial period times the rate of change for all countries as shown in above formula.

Country

Initial Period

(1)

K

(2)

Expected Value

X (2)

Argentina

1084

1.065333141

1154.821125

Australia

500

1.065333141

532.6665707

Brazil

600

1.065333141

639.1998849

Burma

367

1.065333141

390.9772629

Cambodia

850

1.065333141

905.5331702

China

2752

1.065333141

2931.796805

Egypt

2879

1.065333141

3067.094114

Guyana

675

1.065333141

719.0998705

India

12396

1.065333141

13205.86962

Japan

600

1.065333141

639.1998849

Republic of Korea

596

1.065333141

634.9385523

Pakistan

8597

1.065333141

9158.669017

Thailand

24787

1.065333141

26406.41258

United States

10153

1.065333141

10816.32739

Uruguay

2378

1.065333141

2533.36221

Vietnam

14174

1.065333141

15100.03195

TOTAL EXPORT

83,388

1.065333141

88,836

Table 4.3: Expected Export Value at the end of Terminal Period (‘000’000 tonnes)

Table 4.3 shows the expected export value for each country at the end of terminal period. The value is equal to the yield of the production the value of initial period and the total growth rate.

D. Expected Change

E ( Vj) = E ( Vj,t) – Vj,t-1

= Vj,t-1 (K-1)

Table 4.4 shows the expected change for each country. It is found by simply times the initial exporting value with the total growth rate that is minus by one.

Country

Initial Period

(1)

K

(2)

K-1

(3)

Expected Change

X (3)

Argentina

1084

1.065333141

0.065333141

70.82112534

Australia

500

1.065333141

0.065333141

32.66657073

Brazil

600

1.065333141

0.065333141

39.19988488

Burma

367

1.065333141

0.065333141

23.97726292

Cambodia

850

1.065333141

0.065333141

55.53317024

China

2752

1.065333141

0.065333141

179.7968053

Egypt

2879

1.065333141

0.065333141

188.0941143

Guyana

675

1.065333141

0.065333141

44.09987048

India

12396

1.065333141

0.065333141

809.8696215

Japan

600

1.065333141

0.065333141

39.19988488

Republic of Korea

596

1.065333141

0.065333141

38.93855231

Pakistan

8597

1.065333141

0.065333141

561.6690171

Thailand

24787

1.065333141

0.065333141

1619.412577

United States

10153

1.065333141

0.065333141

663.3273852

Uruguay

2378

1.065333141

0.065333141

155.3622104

Vietnam

14174

1.065333141

0.065333141

926.031947

TOTAL EXPORT

83388

1.065333141

0.065333141

5448

Table 4.4: Expected Change for Each Exporting Country (‘000’000 tonnes)

E. Net Shift

Nj = Vj - E ( Vj)

Table below shows the net shift data that is found by minus the actual change with the expected change. Net shift shows the total change in the value of rice exports.

Country

Actual Change

Expected Change

Net Shift

Argentina

354

70.82112534

283.1788747

Australia

-245

32.66657073

-277.6665707

Brazil

703

39.19988488

663.8001151

Burma

1257

23.97726292

1233.022737

Cambodia

900

55.53317024

844.4668298

China

340

179.7968053

160.2031947

Egypt

-345

188.0941143

-533.0941143

Guyana

-5

44.09987048

-49.09987048

India

-562

809.8696215

-1371.869622

Japan

0

39.19988488

-39.19988488

Republic of Korea

-431

38.93855231

-469.9385523

Pakistan

99

561.6690171

-462.6690171

Thailand

3351

1619.412577

1731.587423

United States

-939

663.3273852

-1602.327385

Uruguay

24

155.3622104

-131.3622104

Vietnam

947

926.031947

20.96805296

TOTAL EXPORT

5448

5448

9.23706E-12

Table 4.5: Net Shift

F. Total Absolute Net Shift

S = Total Net Shift Value*/2

S = 9.23706E-12/2

S = 4.61853E-12

G. Percentage Net Shift

Pj = Net Shift / Total Absolute Net Shift X 100%

Country

Net Shift

Total Absolute Net Shift

Percentage Net Shift (%)

Argentina

283.1788747

4.61853E-12

6.13137E+15

Australia

-277.6665707

4.61853E-12

-6.01201E+15

Brazil

663.8001151

4.61853E-12

1.43725E+16

Burma

1233.022737

4.61853E-12

2.66973E+16

Cambodia

844.4668298

4.61853E-12

1.82843E+16

China

160.2031947

4.61853E-12

3.46871E+15

Egypt

-533.0941143

4.61853E-12

-1.15425E+16

Guyana

-49.09987048

4.61853E-12

-1.06311E+15

India

-1371.869622

4.61853E-12

-2.97036E+16

Japan

-39.19988488

4.61853E-12

-8.48753E+14

Republic of Korea

-469.9385523

4.61853E-12

-1.01751E+16

Pakistan

-462.6690171

4.61853E-12

-1.00177E+16

Thailand

1731.587423

4.61853E-12

3.74922E+16

United States

-1602.327385

4.61853E-12

-3.46935E+16

Uruguay

-131.3622104

4.61853E-12

-2.84424E+15

Vietnam

20.96805296

4.61853E-12

4.53999E+14

TOTAL EXPORT

9.23706E-12

4.61853E-12

195.4375

Table 4.6: The Percentage Net Shift for Each Country

Percentage Net Shift will test on the export growth for each country in terms of percentage. Note that any negative sign in the percentage refer to the percentage of decline in the rice export to the related countries.

From the results of the findings, the authority body such as the United States Department of Agriculture for World rice trade might want to know the performance of the United States rice export to each exporting country. Rice is produced worldwide and is the world's second largest staple crop, behind corn.

The factor that affecting export referred to the International Marketing Task. Under the international marketing task, there are two components that marketers have to consider in doing business at the foreign country.

The components consist of controllable and uncontrollable. The controllable component may be involved firm characteristic, price, product, promotion, channels of distribution and research. While the uncontrollable components consist of Domestic Environment and Foreign Environment, the domestic environment that is uncontrollable is political/ legal forces, competitive structure and economic climate.

Foreign environment that is uncontrollable consist of seven criteria which are political or legal forces, economic forces, cultural forces, geography and infrastructure, structure of distribution, level of technology and competitive forces.

In order to sustain in export industry, Government, other authorities and producers play an important role to always do research and development to each exporting country to know the strength and opportunities that could grab in the rice export industry.

By referring to table below, it shows the top countries that have high percentage of growth in United States’ rice export.

Country

Percentage Net Shift (%)

Thailand

3.75E+16

Burma

2.67E+16

Cambodia

1.83E+16

Brazil

1.44E+16

Argentina

6.13E+15

China

3.47E+15

Vietnam

4.54E+14

Japan

-8.49E+14

Guyana

-1.06E+15

Uruguay

-2.84E+15

Australia

-6.01E+15

Pakistan

-1.00E+16

Republic of Korea

-1.02E+16

Egypt

-1.15E+16

India

-2.97E+16

United States

-3.47E+16

TOTAL EXPORT

195.4375

Here, it can be seen that Thailand are leading in the top because Thailand is one of the top exporter in the world. So, there are no reasons why their percentage in net shift is so high among the other countries since their main income from the country from an agriculture sector which is the rice.

On the other hand, the table below shows the bottom countries that experience a decline in percentage of United States’ rice export to it country.

Country

Percentage Net Shift (%)

United States

-3.47E+16

India

-2.97E+16

Egypt

-1.15E+16

Republic of Korea

-1.02E+16

Pakistan

-1.00E+16

Australia

-6.01E+15

Uruguay

-2.84E+15

Guyana

-1.06E+15

Japan

-8.49E+14

Vietnam

4.54E+14

China

3.47E+15

Argentina

6.13E+15

Brazil

1.44E+16

Cambodia

1.83E+16

Burma

2.67E+16

Thailand

3.75E+16

TOTAL EXPORT

195.4375

From the table above, it can be seen that the United States has the lowest percentage of net shift in the rice export. The reason might be that rice is not widely grown in United States unlike wheat. Besides that, the United States main crop that they export is corn since they are the biggest corn producer in the world which is the total opposite to Thailand.

CONCLUSION AND RECOMMENDATION

As a conclusion, according to the data that we have shown above on the rice export for the countries, there are six countries experience decline in the rice export. One of the countries is United Stated. It can be seen that every year United State has decline in the export of rice which they have the lowest percentage of net shift in the rice export. Although their countries is in the top five world rice exporter but their main crop is on corn unlike Thailand. Their net shift percentage is high among other countries, where in Thailand their main income is on the agriculture sector which is rice.

For a country to involve in the international marketing such as the rice export, they need to identify the controllable and uncontrollable item which has been mention above. Where the controllable elements are characteristic, price, product, promotion, channels of distribution and research. These element need to be observe to make them alert on the changes and adaptation they need to make on the countries. One of the important objectives of the international marketing is to make profit out of the trade involved. To achieve the objective the countries need to observe the uncontrollable element such as economic growth of the export countries so that it can maintain the long term relationship with countries involved.