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Tuesday, June 10, 2008
Is rice cartel a pipe dream?
Posted by Veera Preteepchaikul
June 10, 2008
Western critics have always held in contempt the idea of a rice cartel by rice exporting countries. "Impossible!" or "A pipe dream" are some of the standard comments heard each time the idea was raised.
Similar comments were heard the other day when Prime Minister Samak Sundaravej, out of the blue, raised the idea of rice producing countries in Southeast Asia grouping together to form an Opec-style rice cartel during his visit to Burma to plead with the Burmese military junta to open up the country for relief materials to flow in for victims of Cyclone Nargis. No sooner that the issue was raised, it quickly died down. There were no responses from government leaders from rice producing countries, among them Vietnam, Burma, Laos and Cambodia. Mr Samak himself did not pursue the matter probably because he might not be serious about it in the first place. Or perhaps he has no idea about how the idea is to be implemented.
But Dhanin Chearavanont, the chief executive of Charoen Pokphand agri-business conglomerate, does not believe that the idea of a rice cartel is a pipe dream. He believes that it can become a reality if there is genuine cooperation from rice exporting countries.
As the world's leading rice exporter, Mr Dhanin said Thailand should take the lead in the attempt to form the rice cartel which will coordinate production of rice producing countires in the region and to regulate rice prices. He however is of the opinion that the rice prices must be kept high but at reasonable levels.
In order to regulate rice prices, certain mechanism must be in place such as storage facilities to store up surplus rice and to release them when prices are right. "The trick is to sell less for higher prices than to dump the product at lower prices," he said, adding that Thailand must not dump its products to undercut the prices of the other exporters.
When a man like Mr Dhanin said the idea of a rice cartel is not impossible, we should lend him not just the receiving ears but should give it a try. Take the case of Opec for an example. Had the Arabs believed in the criticism that they would never be able to come together to coordinate their oil output and to regulate the oil prices, Opec would never been established. And how Opec has evolved in the past 40 plus years since its inception in the 60s. It has now become a monster which, in apparent conniavance with all the filthy rich western hedge funds, is now holding the world hostage and is now bleeding every soul on earth, especially the poor, with its outrageous and irrational oil price hike.
The percieved rice cartel should not follow in the same footstep of Opec in jacking up the prices of oil almost on daily basis and without good justification. It should be formed to regulate production and prices in a way to give the impoverished farmers a fair share of their produce. And last but not least, it can serve as a bargaining chip of oil consuming countries.
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date : 22/06/2008 time : 04:15
date : 06/08/2008 time : 04:03However, would that eventuate if OREC came about? No, it would simply benefit the intermediaries, large conglomerates and commodity traders in the middle of the business. If the objective is to help the poor in rural areas alternative crops and technology reflect the best solution. Not a market manipulating mechanism to enrich the already enriched further.
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- Name: veera
- Email: veera@Bangkokpost.co.th
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- Entry: 38
1. Thailand … 10 million tons (34.5% of global rice exports)
2.India … 4.8 million tons (16.5%)
3. Vietnam … 4.1 million tons (14.1%)
4. United States … 3.1 million tons (10.6%)
5. Pakistan … 1.8 million tons (6.3%)
6. China (including Taiwan) … 901,550 tons (3.1%)
7. Egypt … 836,940 tons (2.9%)
8. Italy … 668,940 tons (2.3%)
9. Uruguay … 609,170 tons (2.1%)
10. Spain … 346,030 tons (1.2%)
( http://tinyurl.com/56dac6 )
Note that the United States is presently the world's number 4 rice exporter. Unlike Asia rice is not a daily food. Rice in the US is grown on land that cannot be easily used for other purposes due to strong environmental regulation. Much of the land that used to produce rice in the US is presently uncultivated due to the historically low price of rice. That is changing. If a rice cartel were formed and high prices were sustained the rice land in the US that is presently uncultivated would quickly be put into production. With the economies of scale that exist in US farming it is unlikely the proposed rice cartel could control the market price of rice. Rice production in the US is highly mechanized. Giant tractors now exist that cultivate land using GPS and a computer. The farmer who sits in an air conditioned cab is there to correct any unexpected problems. The rice producers in the US could not be brought into the cartel due to antitrust laws.
Thailand would be better served by putting her energy into developing biodiesel production using algae feedstock. Thailand's climate offers an excellent opportunity in that area. Biodiesel from algae yields 5000 to 20,000 gallons per acre (2.5 rai) vs 230-500 gallons per acre for palm oil. A plant in the US producing biodiesel from Algae began operation this year with other companies presently building similar facilities. Thailand could do likewise.
Fragrant rice will remain a strong point for Thailand but a rice cartel with the goal of controlling the market price is not likely possible.