Rice fund set to bite into price instability

A regional reserve fund will help keep rice prices stable and ensure regional food security.

ASEAN plus China, Japan and South Korea recently agreed in Laos to establish a rice reserve fund to bridle volatile movements in commodity prices of grains, without making abrupt procurements that could spark market panic.

The decision was made amid a spike in commodity prices caused by the on-going soaring petroleum prices in the Middle East.

The Jakarta Post quoted Indonesian Trade Minister Mari Elka Pangestu as saying the fund’s agreement would be signed in October, this year.

ASEAN and the three east Asian countries earmarked 787,000 tonnes of rice for the reserve fund, with all ASEAN members contributing 87,000 tonnes, plus Japan 250,000 tonnes, China 300,000 tonnes and South Korea 150,000 tonnes, according to the Jakarta Post.

The exact amount of rice Vietnam will contribute to the fund has yet to be released.

“Our biggest challenge today is achieving food security in the context of climate change, a fast growing population and declining farmland area. We need to find the best solution to this problem,” said Minister of Agriculture and Rural Development Cao Duc Phat.

He said the fund reflected the “wise action” of ASEAN+3 given “the slow food production growth due to the declining farmland both in quantity and quality and the International Rice Research Institute’s warning of a reduction in rice yields in Asia.

On October 20, 2010, Prime Minister Nguyen Tan Dung approved a draft of ASEAN Plus Three Emergency Rice Reserve (APTERR), which is regional cooperation standing on humanitarian grounds, and asked the Ministry of Finance to calculate Vietnam’s cash and rice volumes to contribute to APTERR. The APTERR agreement was inked on October 24, 2010 in Cambodia.

APTERR is aimed to secure food security in an emergency caused by temporary and large-scale calamity. Therefore, APTERR is mutual assistance system to provide necessary rice to rice-needy people.

ASEAN member countries should not reiterate the 2008 rice-related market scenarios, due to sharp hikes in rice prices which disrupted normal business.

At present, the Philippines, which is Vietnam’s biggest rice importer, is revising its rice importing plan. Malaysia recently trumpeted that it was boosting rice purchase from Thailand and Vietnam, for fear of the world’s on-going food shortages.

Vietnam is expected to export six million tonnes of rice, down from last year’s 6.8 million tonnes.

Tags: Rice fund