Global food situation may face a difficult time in this year due to cost escalation of production as well as supply constraint, especially in the developing countries. The latest forecast by the Food and Agriculture Organisation (FAO) of the United Nations mentioned that the immediate past year (2017) was likely to see around 6 per cent rise in global food output. But the world food import bill may reach its second highest level due to sharp increases in freight rates, stronger import demands and higheer prices of most food commodities.
Among the food items, global output of rice in 2017 was likely to remain unchanged at 500.8 million tonnes which was 501 million tonnes in 2016. Among the major rice producers, production in China, India, Bangladesh, Vietnam and Japan was projected to either decline or remain unchanged. Rice output in Indonesia, Thailand, the Philippines, Myanmar and Brazil was, however, projected to increase marginally. These countries are top-10 producers of rice in the world.
The report further added that global rice stock would slightly increase in the past year, by 0.4 per cent to 169.2 million tonnes. But utilisation of rice as food would expand by 1.1 per cent in the current year and non-food uses of rice were projected to change little year-on-year.
The alarming thing is the possible decline in rice trade growth in 2018. FAO projected that world trade in rice would grow by a mere 1.0 per cent in the current year to reach 45.4 million tonnes while the past year was likely to experience 8.0 per cent growth. Lower growth in rice trade means a large number of countries will not be able to import required rice from global market. Or, major exporting countries will cut down their exports to cater for local demand against possible shortfall in domestic production.
As the 11th ministerial conference of the World Trade Organisation (WTO) in December last year failed to make any decision on a permanent solution of public stockholding of food, dispute may spark on trade-distorting subsidisation of rice. In fact, there is a possibility that some member countries of WTO will drag major rice producing countries like India and China to the Dispute Settlement Body (DSB) for heavily subsidising their food production. It is still not clear whether temporary waiver of such subsidisation, initiated at the Bali ministerial conference of the WTO in 2013, will continue or not. Some argued that temporary waiver would continue until there is a permanent solution. Others opposed saying that the temporary waiver was valid for four years. So, it would no more hold out after 2017. Global rice market may face some turmoil due to such ambiguity or conflicting views on the issue.
BANGLADESH SITUATION: The FAO report also projected a gloomy future of food situation in Bangladesh. It mentioned that rice output in the country might decline by 1.70 per cent in 2017 mainly due to the impact of flood that swept parts of the country. It projected that annual output of rice in Bangladesh would decline to 34.1 million tonnes in 2017 as against 34.7 million tonnes in 2016.
In fact, damage of food grains due to flood pushed the price of rice at an alarming level which prevailed for a couple of months in the past year. Reduction of import duty on rice didn't pay off. According to an estimate by the South Asian Network on Economic Modelling (SANEM), some 0.52 million people have fallen into poverty due to rise in the price of rice last year. The retail price of per kilogram of coarse variety of rice was Tk 35.84 in January last year which hit Tk 47.78 in September due to crop damage from floods and depleting public stocks.
In the last week of the past year, average retail price of coarse rice stood at Tk 44-46 per kg which was 6 per cent higher from a month earlier and 23 per cent from a year back, according to the Trading Corporation of Bangladesh (TCB).
Bangladesh, which is now the fourth largest producer of rice after China, India and Indonesia, may see some recovery of rice production in 2018, according to the FAO forecast. As a result, the country may reduce import of rice this year.
There is no single strong reason for the recent price hike of rice in the country. Crop damaged by sudden flood definitely played a role in the surge of market price. Escalation of the transport cost was another reason. Decline in government stock also created a sense of panic. Predicting possible decline in output as well as supply constraint, some big millers and traders tried to take advantage of the situation. As a result, price of rice jumped. Even the government raised the price of rice substantially in the open market sale (OMS) operation which gave a signal to the traders in favour of price hike.
As rice is the staple food in Bangladesh, its price affects almost all sections of people. Prices of other food stuffs, especially vegetables, also increased.
Beside rice, the growing demand for wheat compels Bangladesh to import it from the global market. The country is the sixth largest importer of wheat and the annual import might have reached 6.0 million tonnes by the end of the past year while domestic production was projected to remain unchanged at 1.4 million tonnes. FAO also projected that wheat stock ending in 2018 would reach 3.3 million tonnes.
According to the FAO projection, global wheat production in 2017 was likely to decline to 752.8 million tonnes, down slightly from 2016. Like rice, world wheat trade was also projected to decline marginally by 1.2 per cent amounting to 175.2 million tonnes. The possible decline in world trade this year is largely the outcome of reduced import demand in Asia. Nevertheless, marginal decline in trade may cause import of wheat costlier for Bangladesh in the current year.
Whatever may be the global situation, in Bangladesh it is the lack of comprehensive data on food output, supply, demand and consumption that makes it difficult to detect the real reasons for food price hike and deal with it.
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