Commerce ministry preps rice reaction
The Ministry of Commerce is preparing to address a slump in rice prices, but is wary of answering industry demands for a price floor.
THE Ministry of Commerce is preparing to take action to combat a severe drop in rice prices threatening the country’s farmers, which includes stepping up efforts to secure new export markets. But some solutions suggested by agricultural industry groups – such as a government-mandated price floor – risk raising a host of other problems, Commerce Minister U Than Myint told The Myanmar Times.
The commerce minister said the government is considering as many options as possible to address the plunge in prices, and will decide on the best course of action early this month.
Myanmar has no well-established market for rice exports other than China, but that country’s crackdown on illegal rice imports has left Myanmar with a growing surplus of unsold paddy. Heavy rain during the harvest has made things worse, soaking finished rice and lowering the price, said U Soe Tun, vice president of the Myanmar Rice Federation.
Local farmers are struggling to find willing buyers let alone cover costs, and are worried about falling deeper into debt. Some industry groups are pushing for the government to step in with a minimum price.
“We’ve been demanding that for years,” said U Thein Aung, president of the Myanmar Freedom Farmer League. “We don’t mean that the government has to buy at the highest prices. It would be a fair price that covers the cost of production and fixed in a range where consumers, producers and traders can all benefit.”
Following a meeting with the commerce ministry, U Soe Tun said the government was considering a minimum price. But U Than Myint said it was unclear whether that would be possible.
“There are many challenges to setting a fixed price,” he said. “Who will buy the rice at the fixed price? Does the government have the budget to buy it? Where can we export to? Those questions are hard to answer.”
In many cases, traders and millers are reluctant to purchase paddy because the Chinese export market has crumbled. A minimum price would not help farmers struggling to find a buyer. In the meantime, issues around storing surplus paddy and drying wet rice are still unsolved.
“We need the government to support rice drying to reduce the moisture,” said U Soe Tun, adding this was reducing already pressured rice prices by over 25 percent.
Myanmar Agribusiness Public Corporation (MAPCO) recently signed an agreement worth around US$3 million with South Korean firm SK networks to import 100 grain dryers for rice and corn. The dryers will go to the agribusiness service centres MAPCO is setting up in Yangon, Mandalay and Ayeyarwady regions, but those are not expected to be operational until January.
U Than Myint said the ministry was focused on two measures that could be implemened in concert. The first is altering a rule so that paddy can be exported directly, rather than finished rice.
Rice traders are also planning to push the government to lower administrative restrictions on where they can sell rice within Myanmar. Yangon rice traders looking to make sales in Tanintharyi Region and Rakhine State, for example, require permission from the Yangon Region government.
The other measure the commerce ministry is focussed on is to find new markets for rice and paddy exports other than China. This is by no means a new initiative. Myanmar has been searching for new export markets for some time, but has had difficulty inking successful agreements.
A potential export agreement with the Philippines last year fell through, mainly because Myanmar rice proved too expensive and so the Philippines bought from Vietnam instead. Attempts to renew a memorandum of understanding with Indonesia are under way but yet to come to fruition.
U Khin Maung Lwin, deputy secretary at the commerce ministry, said the government was pursuing exports to the EU and Indonesia, and trying again to form an agreement with the Philippines. He was hopeful that the Indonesia agreement would be finalised soon.
“Indonesia will inform us of the confirmed agreement date,” he said. The Philippines desires Myanmar rice, but at the same price as it pays Vietnam, he added.
The government has held meetings with traders and rice industry officials to identify ways to lower production and logistics costs that have made it hard to compete with other regional exporters.
In order to make progress on opening up new export markets the government is planning a series of foreign trips, U Khin Maung Lwin added.
“At the earliest we’ll conduct visits with rice association representatives [to the EU, Indonesia and the Philippines] before the end of this year,” he told The Myanmar Times.
Although reliance on China for exports has proved risky, the MRF’s U Soe Tun also wants to see an official agreement with China put in place.
“We can’t blame the Chinese government for seizing [illegally imported rice] at the Muse border as it’s their right to stop illegal trade,” he said. “But our government needs to agree quotas for Chinese exports. We signed for 100,000 tonnes [of rice exports to China] last fiscal year, and we are asking [the government] for a 200,000tonne quota for border trade and 200,000-tonne quota for shipments.”
U Khin Maung Lwin said the government was attempting to hold diplomatic discussions with China to secure those official export quotas.
U Ye Min Aung, managing director of MAPCO, said that the MRF and MAPCO have invited Chinese state entities for discussions on rice exports to be held this month. The state entity in charge of export and import quality, the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (AQSIQ), is invited. China’s national macroeconomic agency – the National Development and Reform Commission – will also attend, said U Ye Min Aung.
The discussion would help “facilitate the [necessary export] certificates from related ministries meet the [level of] quality demanded by China for border trade,” he added.
‘There are many challenges to setting a fixed price.’
U Than Myint Minister of Commerce
Workers prepare rice for drying next to a road during the harvest in Nay Pyi Taw.