Rising food prices

Rather than being a threat, the current food crisis caused by rising food prices is a unique historical opportunity for Africa to break from decades of policy bias against agriculture, which accounts for 35% of GDP in the continent and 75% of employment.

The present rice crisis for instance is already forcing African countries to pay attention to local rice production, which has been neglected for so long. In the past few months, rice prices in the global market have jumped to record levels not reached since the 1970s food crisis.

Many factors explain the current high price of rice. First of all, since 2002, the global level of rice production has fallen short of consumption, requiring continuous recourses to globally held rice stocks to compensate for production shortfall. This has resulted in the decline of world rice stocks from 147.3 million tones in 2001 to 74.1 million tones in 2008. According to USDA, the ratio of rice stocks to overall consumption is 17.5% (its lowest level since 1976/77). These stocks, half of which are owned by China, represent two months of world consumption needs.

A compounding factor has been the export ban imposed by major rice exporters. Other factors are the rising prices of oil and freight, depreciation of the dollar and additional pressure on agricultural resources because of biofuel production. The limited scope for increasing rice-growing areas in major Asian producing countries and the absence of major yield-enhancing technological breakthroughs in Asia, together with the low level of global stocks, indicate that prices could remain high in the near future.

While people around the world have been feeling the impact of the soaring food prices, no one has been hurt more than Africans. With nearly 40% of the total rice consumption of Africa coming from the international market, African national rice economies are more exposed to unpredictable external supply and price shocks than those of other continents. A third of the volume of rice traded globally is sourced for Africa. It is also by far the most vulnerable continent because of its high prevalence of poverty and food insecurity.
The eruption of recent riots, due mainly to rising rice prices in Burkina Faso, Cameroon, Cote d’Ivoire, Egypt, Senegal and Mali, testifies to this vulnerability. Policymakers are adopting ill-advised price controls that risk pricing smallholders out of the market and into further deprivation.

The option for Africa is to combine emergency responses for the short term with measures favorable to sustainable expansion of Africa’s rice supply in the longer term. Short-term measures include the reduction of customs duties and taxes on imported rice and the establishment of mechanisms to avoid speculation in the rice markets. However, governments should take care not to undermine incentives for domestic rice production for the benefit of social peace in the major urban centers. The rising trends in rice price levels improve farmers’ incentive for producing more rice.

In the medium- and long-term, tax on all critical inputs, basic agricultural machinery and equipments and post-harvest technologies need to be reduced. Governments also have key roles to play in facilitating access to financial services and credit for resource-poor farmers, seed producers and rice processors; increasing investment in water-control technologies; expanding the rice areas under irrigation; accelerating investment in regional research capacity; and hastening the pace of investment in rural infrastructure.

We are convinced that the future of rice farming lies in Africa. Unlike Asia, this continent has great untapped potential, which can be seen in its large tracts of land and under-utilized water resources. For example, sub-Saharan Africa has 130 million hectares of lowlands but just 3.9 million hectares are under cultivation. Our studies also show that local rice production under irrigated conditions can be as competitive as in Asia and much cheaper than in America.

By Papa Abdoulaye Seck,
Agricultural policy and strategy specialist
Director General, Africa Rice Center (WARDA)

Article appeared in The Economist debate: Rising food prices as Featured Guest's Comments