Friday, May 2, 2008

After oil, it’s an Asian rice cartel

SE Asia Ganging Up To Control Staple Crop Price Chidanand Rajghatta TNN
Washington: As if the world wasn’t coughing up a heavy enough price for the oil cartel, it now faces the frightful prospect of paying through its nose for one of mankind’s staples — rice. Shockwaves are rippling through the trade world following the announcement in Bangkok that the Thai government is considering forming a rice cartel in partnership with Vietnam, Cambodia, Myanmar and Laos. Thailand is the world’s largest rice exporter (not grower), and the move is evidently aimed at using its dominant market position to influence the price of rice in the same way that the Organization of the Petroleum Exporting Countries (OPEC) tries to manipulate oil prices. The other four neighboring countries being roped in are also significant rice exporters. A cartel is a formal agreement among firms or countries aimed at coordinating on matters such as price fixing, total industry output, market shares, allocation of customers and territories, tender rigging, and division of profits. Typically, the aim of such collusion is to increase individual member’s profits by reducing competition. While China and India remain the world’s top two rice-growing countries, most of their production is consumed internally, leaving the five South Asian countries as the world’s key exporters. The news immediately invoked OPEC-inspired fears of cartel activity, but Thai leaders denied any price gouging motive. “We don’t aspire to be like OPEC, but we hope to be just a group of five to help each other in trading rice on the world market,” Thailand PM Samak Sundaravej told The Nation newspaper. The Thai move is evidently aimed at buttressing the fortunes of the ruling party, which depends on rural support, by hiking support price for farmers. Already, the price of the benchmark Thai rice has tripled in recent months to almost $ 1000 a ton, much to the delight of local farmers, but leading to a run on the grain in some parts of the world, including in US. The US exports much of its own home grown variety of rice but imports Thai Jasmine and Indian Basmati, mostly for its large immigrant population. While the Thai leader made light of the rise in prices, suggesting that a 100 gram service of rice going up from five cents to ten cents was nothing more than an inconvenience to customers, such a hike is seen as crippling for the poor in many countries. An editorial in the Bangkok Post condemned the proposal for an Orec of rice producers, saying it would have “painted a terrible image of Thailand as determined to profit by controlling food prices, even if hungry people starved worldwide.” “Most would see an Orec in even worse light than Opec, since rice is life-giving, not a luxury,” the paper observed, saying that after weekend talks with India’s commerce minister Kamal Nath, the Thailand government may now be more inclined towards international cooperation on raising rice production.

Reproduced from Times of India Hyderabad Edition dated 02.05.2008.

Where are we heading?

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