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March 16, 2008

Increased African rice consumption ups prices

Two weeks ago, prices of rice crossed $500-a-tonne-mark. Along with wheat, rice prices have also increased and nearly doubled in the last 12 months. In the last one week, prices have seen nearly 10 per cent jump on heavy demand from the Philippines, the largest importer of the cereal, and African countries.

The rising demand for rice can in a way be attributed to African countries, which are moving away from coarse cereals such as corn, according to Mr Suresh Babu, Senior Research Fellow of the US-based International Food Policy Research Institute (IFPRI). Demand from Africa, in particular, is expected to keep the prices firm.

According to the Food and Agriculture Organisation, an arm of the UN, utilisation of rice during 2007-08 is likely to 424.5 million tonnes (mt) against a production of 422.6 mt. Ending stocks are projected to be 0.7 mt down at 102.6 mt.

Prices have run up to record mainly on support shortages in Pakistan and India, where minimum export prices have been imposed to ensure ample supply in the domestic market.

“Countries such as Angola, Uganda and Mozambique are experiencing higher growth in their economy as they have all come away from conflicts. As a result, there has been growth in individuals’ income,” Mr Babu said.

One of the reasons for these African countries to shift to rice is because it is easy to cook and eat. Rice, when compared with other grains, is also cheaper. Again, West African countries such as Mali, Nigeria have begun to consume rice. “During 1970s, these nations use to grow pearl millets and sorghum on the banks of river Mali. That is disappearing slowly now,” he said.

Rice is also seen as a grain easy to import rather than grow in Africa because of high input costs, especially in areas where there are no irrigation. “In Africa, less than four per cent of the lands have irrigation facilities,” Mr Babu said.

“In South and East Africa, income plays a major role in the import of rice. Also, we don’t seen huge irrigation projects coming up there in the near future. Rice needs irrigation, which also ensure higher productivity. Productivity is low in South and East Africa compared with West Africa, thus pushing up input costs,” he said.

Also, wheat is seen as an urban phenomenon. Wheat has to be milled before use and can’t be directly cooked like rice. There are few bread processing units in Africa. “Unlike India, there is no alternative such as chappati or flat bread in Africa,” Mr Suresh said.

“The Japanese rice cookers have also ushered in a revolution as far as consumption. They have been lapped up by the Africans and led to rise in offtake,” Mr Babu added.

However, the steep rise in prices is likely to have an effect on imports by African countries. According to FAO, it could decline by at least half a million tonnes.

The Hindu Business Line

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