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

Accessing Rice Markets in the Context of Global Soaring Inputs and Food Prices: Challenges and Opportunities for West Africa. ADAMA EKBERG, Ph.D. Commodities, WTO and Trade Related Issues Email: adamaekberg.coulibaly@fao.org Mobile: (233) - 248939236

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

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  1. Accessing Rice Markets in the Context of Global Soaring Inputs and Food Prices: Challenges and Opportunities for West Africa. ADAMA EKBERG, Ph.D. Commodities, WTO and Trade Related Issues Email: adamaekberg.coulibaly@fao.org Mobile: (233) - 248939236 FAO Regional Office for Africa, Accra, Ghana FAO REGIONAL WORKSHOPS ON RICE AND AQUACULTURE FOR PRODUCTIVITY INCREASE & MARKET DEVELOPMENT IN WEST AFRICA 23-27 March 2009, Burkina Faso, Ouagadougou.

  2. 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

  3. Context of current and west Africa food markets ? A paradox of high food production and high prices… 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%).

  4. 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.

  5. What has caused food commodity prices to increase since 2000 globally ? What the layers causation at play • 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 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) 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 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 Underneath all these demand drivers is the high price of petroleum and other fossil fuels.

  6. What has caused food commodity prices to increase since 2000 globally… ? The rice difference • for rice the story is more complicated. • the causal link are many and difficult to dealt with in the short run 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. 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. 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. 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.

  7. What has caused food commodity prices to increase since 2000 locally…? Some current and future major external factors/drivers at play ? West Africa population is high and growing rapidly along with income: RCI/Nigeria Dietary changes and tastes is changing with rapid urbanisation Supply side capacities remain constrained with uncertain climate, fuel, fertilizer costs High degree of global high price transmission to domestic economies (consum/produc) Uncoordinated governments responses to the food soaring prices: export bans, disparate rice tariff policies (TEC); speculation (8 local currencies) and panic.

  8. 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

  9. What has caused food commodity prices to increase since 2000 locally…? Disparate future CET schemes to hinder intra regional rice trade • 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 tariff barriers affect west African rice markets ? What non tariff measures affect west African rice markets ?

  10. What has caused food prices to increase Since 2000 locally ? HS code COMESA ECCAS ECOWAS AMU EAC SADC SACU Rice less likely coming from other Africa sub regions 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 High tariff barriers affecting rice markets integration West Africa is rice focused in Africa but its MFN applied tariffs in force are among the highest in Africa Source : UNCTAD Trains in WITS, 2006

  11. What has caused local rice prices to increase Rice less likely to come from other African sub regions… Governments responded to the recent food soaring prices in an unprecedented mannerwith insufficiently cordinated measures, sometimes inconsistent with existing trade related commitments. Other constraints affecting food markets integration Export restrictions Ethiopia, Madagascar, Malawi, Sudan, Tanzania, Zimbabwe, (India, Vietnam, Thailand) Price controls/consumer subsidies Ethiopia, Madagascar, Malawi, Sudan, Tanzania, Zimbabwe Increase supply using foodgrain stocks Ethiopia, Sudan, Swaziland, Tanzania, Zambia Reduce taxes on food grains Angola, Burundi, Cameroon, DRC, Ethiopia, Gabon, Lesotho, Madagascar, South Africa, Sudan, Tanzania, Zambia, Zimbabwe

  12. What could cause keep future rice prices high? Some opportunities to increase rice prices ahead rooms for further rice price increases ? High population growth globally and locally Global food market uncertainties with low rice stock to use ratio globally Changing consumer demand (dif. in food preferences/ diff in culture, high income) High rice price volatility with emerging climate change, increasing water shortage for irrigation

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

  14. world rice stock-to-use ratio to remain low

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

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

  17. High co movements between domestic retail prices and imported prices, GHC/kg, Ghana, Jan – Dec 2008 Source : MOFA, 2009 Overall price trend: Complete departure from 2006 and 2007. Clear extraordinary price hikes beginning in April/May. Causes 1. 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.

  18. High price co movements between domestic prices and imported prices, CFA/kg, Senegal, oct 07 to sept 08 Source : MOFA

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

  20. Converting food crises into increased intra rice regional trading opportunities ? COMESA COMESA ECCAS ECCAS ECOWAS ECOWAS AMU AMU EAC EAC SADC SADC WAEMU WAEMU Potential for rice in intra regional food trade ? Rice Rice 63-74% 63-74% 75%+ 75%+ 75%+ 75%+ 75%+ 75%+ 63-74% 63-74% 63-74% 63-74% 75%+ 75%+ • 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 VHP THP VHP THP VHP THP HP HP HP VHP There are high trade intensity potential for accelerating intra regional rice trade in West Africa HP Source: COMTRADE, 2005 ; HP High Potential ; VHP Very High Potentiel

  21. Converting global food crises into trading opportun. • Implement rice product status policy What can we do for west Africa rice developers ? Promote and protect rice as a sensitive food product Priority areas for actions To expand west Africa rice markets = Need to better harmonize rice policies + coordinate rice projects • 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 • sustainrice policy support at the highest political level • provide support for adequate rice financing, • support appropriate rice technology transfer, R&D, infrastructure • developper des chaines alimentaires performants • innovative capacity building of beneficiaries (farmers)

  22. 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

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