Thursday, May 29, 2008

Rice Trade & Japan

Strange are the ways of world trade…Japan buys expensive rice from America and then uses it as animal feed. In today’s BusinessLine, the following caption accompanied the photo of a man examining grain samples::

The Japanese Government is "favorably" considering a request to sell 200,000 tonnes of rice to the Phillippines. The rice will come from stocks that Japan imported reluctantly from other countries under an agreement to provide minimum international access to its rice market every year. This has led to softening of prices a little.

Japan’s economy depends heavily on international trade, which is very often skewed in its favor. So other countries try to balance their trade by 'encouraging' Japan to buy products from them.

A couple of decades ago France was so upset with the huge number of Japanese VCR’s, TVs and electronic equipment being imported that they threatened to raise tariff barriers. Japan conceded that it had to import something in return from France and agreed to import wine. The Japanese were not too fond of wine but, over the years, they have developed a taste for it – much to relief of trade negotiators from both countries.

Similarly, the Americans forced Japan to import Californian rice. Unlike wine, the Japanese have not been able to cultivate a taste for foreign rice. They have a strong preference for locally cultivated “sticky” rice, and they don’t care much for the long-grained, fragrant rice that the rest of the world consumes.

NK tells me that even amongst sticky rice, there is a hierarchy in Japan. Brands like Sasanishiki and Koshihikari command a premium of over Yen 600/kg (~Rs. 200/kg) depending on the prefecture in which it is grown. The same variety from Thailand or Nepal sells at a discount of Yen 300/kg and Yen 200/kg respectively. What about the American rice? “Oh, nobody in Japan wants it. The sembei (rice-cracker) manufacturers buy some of it; some goes as animal feed, but huge quantities just lie unused.”

In 2006, Japan produced about 10mT of rice most of which was consumed domestically. Even though other countries produce much more - China (182mT), India (136mT), Thailand (29mT) and Myanmar (25mT) – but Japan has one of the highest per rice consumption at over 60 kg/year.

According to reports, about 1.5 million tones of American rice are idling in Japanese silos, thanks to a “complex and wasteful lattice of rules, subsidies and pacts that have knocked global agriculture markets so badly out of kilter”. Compared to the total world rice production of 646mT (2007, IRRI) this may look like a small figure but only 6% or about 38mT traded internationally. This year it is a lot lesser – a crisis that has been worsened by the cyclone in Myanmar, which has turned it from a rice exporter to a net importer.

Everybody is looking for ways to increase supplies, and suddenly, everybody wants a slice of the 1.5mT of rice rotting in Japan...


Interesting Links from International Rice Research Institute:

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