Rice is king, but at a price

Most of us, when we worry about food prices, think short term - the price today compared with yesterday; the chance that the price will have gone up again tomorrow. But Oxfam this week risked some long term predictions, and came up with alarming results. They foresaw the steepest rise of all in the price of rice, with rice in China, for instance, becoming 80 percent more expensive by 2020, and 180 percent dearer by 2030.

The price of rice is obviously of huge concern in China, India and the rest of Asia, where it has always been the basis of the diet - just as the Middle East has traditionally depended on bread, Italy on pasta, northern Europe on potatoes and Africa on maize, cassava and root crops like yams.

But tastes in food are changing, driven by urban lifestyles and global communications. Consumers, no longer limited to what they can grow in their own area, look for foods which are easy to prepare and eat. The losers have been staples which need lengthy preparation - soaking, peeling and pounding. The winners have been pasta, noodles, and above all, rice, making the price of rice a matter of pressing concern far beyond the traditional rice-eating countries.

Nigeria has a rich tradition of foods based on local crops, amala (yam skin porridge) and eba (made from cassava), ogi (fermented cereal) and pounded yam. Rice used to be a party food, noodles practically unheard of. Now rice and noodle dishes are the staple of roadside food stalls, and every night in TV advertisements, smiling housewives feed their perfect families on instant noodles and jollof rice.

Forty years ago Nigerians ate an average of three kilograms of rice a year; now it is 35kg and rising. Nigeria is one of the world’s biggest rice importers, lying third (behind the Philippines and Iran) in 2008, the last year for which International Rice Research Institute figures are available.

''Forty years ago Nigerians ate an average of three kilograms of rice a year; now it is 35kg and rising''

It should add up to big profits for the international rice traders, and it does, but they are acutely aware of the vulnerability of the system. A senior executive from one of the world’s biggest global dealers in agricultural produce said this week he was really concerned about threats to, and the sustainability of the supply chain.

“Look at Africa,” Chris Brett, senior vice-president and global supply chain manager for Olam International, told an audience at the UK’s Institute of Development Studies. “It’s absolutely amazing how much food is imported. We know that the food security agenda is very important.”

Vulnerable to price fluctuations

Of all the world’s food commodities, rice is perhaps the must vulnerable to sudden shocks. The world may produce a huge amount of the grain, but nearly all of it is eaten in the countries where it is produced - only somewhere in the region of 5-7 percent is traded on the international markets. So there is a disproportionately large effect on the price when in a major producing country has a bad harvest, or stops exporting, as India did in 2008. The supply is not limitless. 1.3 million tons is the most rice Olam has traded on the international market in a year, but that has now fallen back a little to 1.1 million. Brett told his audience: “We seem to have hit a ceiling.”

The hunger for security of supply has led Olam into production and processing, and it is now working with 12,000 rice farmers and operating two mills in Nigeria, the country where it first started as a produce buying company more than 20 years ago. “We have decided that rice is a good business for us to be getting into. Nigeria imports 2.4 million tons of rice a year; it’s not rocket science to think that if you can produce it, there’s a market.”

Production has flourished. With help from US Agency for International Development’s (USAID) MARKETS scheme, an agribusiness initiative, the farmers’ associations have received loans for inputs and improved seed, and raised their yields from 1.5 to 4.4 tons a hectare. The once-derelict mills are turning out smartly packaged sacks of “Lobi” brand rice.

It is a secure source of supply within Nigeria and insulated from currency shocks, but Olam’s problem is that Lobi at the moment cannot compete with the popular imported brands from East Asia, either on quality or on price.

Poor quality

Among Nigerian customers, local rice has a poor reputation, often well deserved. Ola Bassey, a young professional woman from Lagos, told IRIN she never bought Nigerian-produced rice. “Some people buy it, it’s cheaper, but it’s just too much stress. You have all the bother of picking the sand and stones out of it - they get the kids to do it for punishment. People would rather pay extra and not have the hassle.”

Olam’s rice mills can deal with the sand and stones, but Brett admitted to IRIN that the quality of the Lobi rice itself was still not as good as that of Mama Gold, Olam’s premium brand of imported rice, just because of the varieties of rice used by the farmers.

Growing rice in Nigeria is also more expensive than growing it in Thailand, the Philippines or China. It is dry upland rice, produced without irrigation, and only one crop a year is possible. Farmers in East Asia cultivate wet paddy rice and can have three harvests a year.

At the moment Olam can sell Lobi more cheaply than the imported varieties because of the duty that has to be paid on imported rice. That duty has already been suspended once, for six months, in 2008. Brett’s nightmare is that a new rise in global food prices will lead to the removal of protection.

“The threat is that I wake up one morning and find the Federal Government has decided to cut import duty on imported rice. Nigerian farmers are never going to be as productive, and at the moment we don’t have the tonnage. But give us another two years, and we should see a stronger commercial viability.”

Currently Nigerian farmers produce only 10 percent of the rice sold on the local market, according to a USAID survey, while Thailand supplies 74 percent of the rice Nigerians buy.

*This article was amended on 3 June to delete a reference to the Institute of Development Studies being part of the University of Sussex

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