Following the conclusion of an agreement with the Venezuelan government to supply 50,000 tonnes of paddy at US$520/tonne and 20,000 tonnes of rice at US$800/t, the government of Guyana has urged rice exporters not to neglect traditional markets. Minister of Agriculture Robert Persaud noted that Venezuela was ‘experiencing problems’ and therefore he urged exporters to ‘continue to pursue traditional rice export markets’.
The Ministry of Agriculture plans to ‘give export preference to the Venezuela market to those millers and exporters who continue to target and develop the traditional markets’. The government of Guyana is also using the issuing of export licences as a means of ensuring that rice millers expeditiously pay farmers for their rice. Minister Persaud told rice millers that ‘only exporters who honour their commitment to farmers and other stakeholders will be allowed access to the new market’.
Rice production in Guyana in the first 6 months of 2011 was up by 23% compared to the corresponding period in 2010. In terms of trade, reports from June 2011 suggest that exports to the EU and CARICOM markets are decreasing, with the decline in exports to the EU market being most pronounced, while exports to Latin American markets, largely to Venezuela, are increasing strongly.
International rice prices (US$/tonne)
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Meanwhile, severe flooding in Thailand has seen international rice prices rise to a 3-year high, with rice prices reaching between US$580 and 590 per tonne. This has been compounded by the worst rice crop in 31 years in South Korea.
In October 2011, the Guyana Rice Development Board ‘launched two new varieties of rice for commercial cultivation in Guyana; the GRDB11 (FG06-98) and the GRDB12 (FG07-35)’. The new varieties are high yielding and suited to the evolving climatic conditions faced in the rice producing areas of Guyana. The new varieties are expected to boost rice yields by up to 75%.
The prices negotiated under the Venezuelan contracts appear favourable compared to average world market prices during 2011. However with severe flooding in Thailand, rice prices have begun to rise sharply (reaching US$580–590/tonne in October 2011 compared to an average of US$513.6 in June 2011).
The Guyana rice sector experience highlights the difficulties of maintaining a balance in diversification efforts for traditional ACP commodity exports to the EU market. In the case of rice in Guyana, efforts have focused on market rather than product diversification, against a background of efforts to improve productivity and respond to challenges posed by climate change.
The agreement with Venezuela can be seen as a successful market diversification effort, based on the development of South–South trade. It has contributed to a reduction in excessive dependence on the EU rice market (down from 80% of all Guyana’s exports in 1996 to 54% in 2010). However lessons appear to have been learned from the market impacts of the political turmoil in the Middle East and North Africa, with emphasis being placed on maintaining diversified export markets so as to foster greater stability in trade, as a basis for production growth.
It is recognised that diversification without stability can give rise to new problems. This accounts for the Ministry of Agriculture’s active use of export licensing arrangements to encourage the maintenance of diversified trade relations in the rice sector. This is in part based on an earlier regional experience: although market diversification efforts were being pursued, Guyanese exporters, in ‘chasing the money’, reallocated rice to higher priced markets, thus leaving neighbouring Caribbean countries facing rice shortages and undermining the development of longer-term supply relationships. This short-term action contributed to the decision of the governments of both Jamaica and Trinidad & Tobago to rebuild their rice producing capacity.
This highlights the importance of the active use of trade policy tools to encourage balanced market diversification as the basis for the commercially sustainable development of rice production.
The active use of trade policy tools such as export licences also needs to be seen in the domestic context, with export licence allocations also being used to rebalance power relationships along rice supply chains, by linking them to timely payment of farmers by the rice milling companies (late payments have regularly undermined efforts to develop rice production in Guyana). Export licences thus constitute one form of government action aimed at strengthening the functioning of the local rice supply chain.