Chinese grain experts pour cold water on idea of "Rice OPEC"
08-MAY-2008 Intellasia | Resourceinvestor
May 8, 2008 - 7:00:00 AM
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The formation of a rice cartel similar in style to the Organisation of the Petroleum Exporting Countries faces a few hurdles, Chinese grain experts have suggested.
The world's largest rice exporter Thailand proposed earlier this month the formation of a rice cartel together with Laos, Burma, Cambodia and Vietnam to increase the standing of the five countries in the international rice market.
"I doubt such a rice monopoly organisation could be successful as rice production is very scattered, particularly in Asian countries. It would be extremely difficult to control the millions of rice farmers, which is unlike the few major oil producing countries and multinationals that are monopolising the world's oil market," a grain specialist with the Shenyang Grain Bureau, who wished to remain anonymous, said.
"Moreover, the rice OPEC involves moral issues, but a cartel like OPEC no doubt takes optimising profits as its top target. Such a rice export cartel could threaten the livelihood of 3 billion rice consumers around the world," the specialist said.
Other leading rice producers in the world like China and India also exert some influence in the international rice market. But China is unlikely to join such a cartel organisation, an unnamed official from the China Grain Industry Association told Interfax.
"China is the world's largest rice producer and consumer. But it now only exports a very small proportion of its output to ensure domestic supplies. Such a policy is unlikely to change in the mid-term," the official said.
In 2007, China exported 1.34 million tonnes of rice, compared with its total output of around 130 million tonnes. Thailand and Vietnam were the world's top rice exporters last year, with exports standing at 9 million tonnes and 5 million tonnes respectively.
Commentary
After seeing how quickly rice prices soared after export restrictions were announced, it is not surprising that major rice exporters would consider setting up an umbrella organisation to magnify their pricing power.
As a minor rice exporter, China would be an unlikely candidate for a "Rice OPEC." Although China may remain officially "neutral," do not be surprised if China flexes its diplomatic and economic muscles behind the scenes to quash any moves to create international grain price-fixing monopolies.
With domestic grain supplies tightening, the government is clearly opposed to any measures that would result in higher grain prices internationally, especially as narrowing domestic production surpluses and shrinking arable land leave the country one mediocre harvest away from becoming a net importer of corn.
Thailand, Laos, Burma, Cambodia and Vietnam are all close neighbours with China and well within its sphere of influence. If "Rice OPEC" talks ever become serious, we will definitely see more frequent visits from top officials, and possibly investment from state-owned enterprises, as part of a concerted effort to throw a wrench in their plans.
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