COVID-19 is part of a web of factors changing the livelihoods of rice farmers and exporters in Southeast Asia. As rice prices climb and governments restrict exports, the rice economy offers a window into how the pandemic is changing our food systems.
Editorial
As cities and countries impose lockdowns, people around the world, from the UK to India, are struggling to access food. The causes vary, with some communities facing lost income and local scarcity while others deal with barriers to movement, but the drivers of this food insecurity are primarily localized and specific to each country or region.
The world isn’t running out of food, but COVID-19 is already impacting our food systems in deep and varied ways: farms in the United States are struggling to make sure they have enough migrant workers and hundreds of thousands of Indonesian fishers are now barely able to earn a living.
One of the key factors impacting our food systems is the price of rice. Food prices dropped globally in March due to cheap fossil fuels and a drop in demand triggered by the economic slowdown. The price of rice, however, rose for the third month in a row as governments began to stockpile rice and exporters began to limit supply.
In Southeast Asia, the pandemic is changing the way the region’s rice farmers and exporters do business. Demand is increasing despite the crumbling global economy and prices are rising as farmers struggle to cope with COVID-19, in addition climate change-fueled drought.
Prices climb as demand for Thai rice surges and farmers face drought and COVID-19
Thailand’s rice prices, used as a benchmark for the global market, have hit a seven-year high as competitors struggle with the impacts of the pandemic. India, the world’s largest rice supplier, has stopped the majority of its rice exports. Vietnam halted exports of most varieties of rice and limited exports of others but the government is expected to move to a quota system for April and May.
Source: FRED, Federal Reserve Bank of St. Louis
Thailand is the world’s second-largest exporter of rice and its domestic rice economy offers some indication of what’s to come for the rest of the world. Since January, domestic rice prices have risen 20-30% and rice packers say prices will continue to climb until the new harvest enters the market in August or September.
Over the past year, Thailand and the Mekong region have experienced their worst drought in 40 years and farmers have seen their livelihoods dry up. Experts pin the drought on both climate change and the construction of hydropower dams along the Mekong River, with producers in Thailand, Cambodia, Laos and Vietnam all feeling the impacts.
Somkiat Makayatorn, honorary president of Thai Rice Packers Association, said the drought has led to as much as a 2 million-tonne drop in the supply of off-season rice this year. This is significant, as last year domestic rice consumption in Thailand totalled 7.5 million tonnes. Somkiat added, however, that Thailand will never face a rice shortage and that any shortages at supermarkets are due to branch supply and distribution issues, not a shortage of food.
Before the pandemic hit, Thai rice producers were also seeing a labour shortage, according to Charoen Laothamatas, president of the Thai Rice Exporters Association. “Because of the labour shortage, farmers opt to use machinery and chemicals that affect Thai rice’s aromatic quality and good taste,” he said, though he added that the quality of Thai rice has also dropped because of climate change and changes in plantation methods.
Thailand could face an additional labour shortage due to COVID-19, but so far this isn’t the case. The Thai government says it has no plans to restrict rice exports.
Thai rice farmers benefit from high prices
There may not be a rice shortage but Thailand’s limited supply is keeping prices high and, combined with the economic slowdown, this effectively caps Thai exports. Despite the fact that Indian and Vietnamese competition is largely absent, Thai rice exporters announced in January that they expect this year’s rice exports to be the lowest in seven years at 7.5 million tonnes, down from 7.8 million in 2019. Thailand’s exports peaked in 2017 at 11.6 million tonnes.
Thai rice merchants say they have yet to see major orders from overseas but it’s only a matter of time. The Philippines, which became the world’s largest rice importer in 2019 after the government abolished import limits, has said it will buy at least 300,000 tonnes of rice to stockpile—on top of the 1.3 million tonnes the country has already purchased in 2020. Manila normally purchases the bulk of its rice from Vietnam and will likely turn to Thailand for the extra supply.
The rice economies of Thailand and Vietnam speak to how COVID-19 is changing our food systems
The challenges for rice farmers and exporters in Southeast Asia will continue to grow, and they reflect broader patterns in how the pandemic is affecting food security. Jean Balié at the International Rice Research Institute published an analysis that shows how rice prices could continue to rise due to three key factors: labour shortages, supply chain disruptions and barriers to liquid capital for farmers.
A shortage of workers due to COVID-19 could drive up the cost of labour, especially as women, who play a central role in rice production in most places, are expected to dedicate even more time to caring for children, the sick and the elderely.
Supply chain issues could drive up prices as the pandemic makes it harder to get rice from producers to markets and also to get agricultural inputs, like seeds and fertilizers, to farmers. Lastly, high interest rates and other barriers to credit may mean that farmers are already struggling to access the capital they need to operate—and to cope with the challenges of drought, COVID-19 and unpredictable markets.
Balié also shows how rice export bans from Vietnam, Cambodia and India can significantly drive up global prices. Though India and Vietnam haven’t stopped exports all together, Cambodia has now announced it will limit exports starting in April.
These supply restrictions will become a major problem if there is also an unprecedented surge in demand—from China, for example. In that scenario, rice prices would jump far past their 2008 peak.
Restrictions on exports, drought in the Mekong, labour shortages and supply chain issues will all limit supply and drive up prices despite the demand-side issues of a global economic slowdown. This isn’t the same as a food shortage—the world still has more than enough food. But COVID-19 is now part of a web of factors making the livelihoods of rice farmers, packers and sellers—the people who work to get our food to where people need it—far less predictable.
