PPT: Complementing Regional Rice Reserves with Novel Domestic Reserve Mechanisms

7/28/2019 PPT: Complementing Regional Rice Reserves with Novel Domestic Reserve Mechanisms

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SESSION 3.2

Complementing Regional RiceReserves with Novel DomesticReserve Mechanisms

Roehlano M. Briones

Senior Research Fellow

Philippine Institute for Development Studies


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What to expect

Overview of self-sufficiency policies

Storage and food security: background and

conceptual framework

Options for expanding reserves

Review of options

Conclusion


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Policy options

Flexible self-sufficiency for importing country:

domestic production target domestic

utilization; import the balance (as needed)

Domestic production target:

Productivity-enhancement to target yield and

yield and area, such that marginal cost

approximates world price

Check that domestic production corresponds to

capita intake compliant with nutritional norms


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Policy options

Example calculation:

60% of 2,000 kcal (daily intake) = 1,200 kcal

Of which 80% from rice = 960 kcal Kcal/gram of rice = 3.5 ~ 100 kg/year

Compare actual per capita intake: 127.4 kg in

Indonesia, 123.3 kg in the Philippines, 141.2kg in Vietnam


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Self-sufficiency policies in practice

Brunei: aims at 60% self-sufficiency

Indonesia: 10% import quota

Philippines: aims at 100% self-sufficiency Malaysia: aims at 70% self-sufficiency

Singapore: 100% dependent on imports


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But in the extreme case (mean vs shock):

AVERAGE 22%

HIGHERThai White 5% FOB mean and 95th percentile

300

350

400

450

500

550

600

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Mean 95th Percentile


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-9.0

-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Thailand Vietnam

Difference between normal and shocked paddy production (%)

AVERAGE 6%

LOWER

AVERAGE 3%LOWER


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Difference between normal and shocked milled rice consumption (%)

AVERAGE 2.5%

LOWER

AVERAGE 2.8%

LOWER

AVERAGE 6.2%

LOWER-9.0

-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.02013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Indonesia Malaysia Philippines


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Response to extreme supply shock

Commitment from exporting countries to

avoid export bans and restrictions

But subject to negotiation and compliance

Example: WTO

Regional rice reserve promising; sizable

(787,000 tons); but insufficient to meet very

large production shocks

Alternative: Increased domestic storage


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Utilization indicators

Utilization ('000 tons) Stocks-to-useratio (%)

Imports-to-useratio (%)

Exports-to-outputratio (%)

2010 2011Growth

(%) 2010 2011 2010 2011 2010 2011

Brunei 32 34 3.9 57.6 47.2 88.2 92.4 0.0 0.0

Cambodia 2,961 3,036 2.5 10.9 17.0 0.0 0.0 35.0 35.0

Indonesia 39,034 39,682 1.7 6.1 4.1 0.6 4.1 0.0 0.0Lao PDR 1,748 1,828 4.6 8.0 14.2 1.3 3.2 2.2 1.3

Malaysia 2,470 2,511 1.6 29.4 30.9 31.6 41.1 0.0 0.0

Myanmar 19,593 19,753 0.8 21.9 20.3 0.0 0.0 4.9 4.9

Philippines 11,898 12,414 4.3 22.1 27.6 20.0 5.7 0.0 0.0

Singapore 209 275 31.9 19.2 18.2 118.9 128.7 - -

Thailand 12,120 12,084 -0.3 63.6 65.5 0.0 0.0 42.2 45.6Vietnam 19,270 19,468 1.0 29.9 22.3 0.0 0.0 27.8 27.0


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Conceptual framework

Economic theory of storage: private sector has

incentive to undertake storage

Theory is empirically relevant

Implies that private storage not sufficient:

Does not take into account risk aversion

Does not take into account threshold effects

(associated with food security)


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Options for expanding storage

Stock SourcingSTORAGE

Public Private

Public

Option 1

Traditional scheme

Procurement of stocks

fromfarmers/traders/millers,

stored in public

warehouse

Option 2

Outsourcing of storage and

even distribution to private

warehouses Complemented by storage

incentives (concessional

loans, tax exemptions, etc.)

Private

Option 3

Compulsory storage inpublic warehouse

Rarely observed

Option 4

Emergency food reservesby regulation


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Evaluating the options

Option 1: public stocks in public storage

Based on recent evidence:

Not cost-effective

Large fiscal burden

Ineffective in price stabilization


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Option 2: public stocks in private storage

Outsourcing: already being implemented

Realizes lower cost from storage Can expand to other privatepublic sector

participation, such as in importation and

logistics (BruSiam Food), distribution (EFAP in

Cambodia)

But still incurs cost of public stocks


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Option 4: private stocks in private storage

Warehouse receipt system: Philippines

A-sugar (US market); B-sugar (domestic); C-sugar (reserves); D-sugar (export); C-sugar can

be reclassified

Sugar is homogenous good, amenable to

warehouse receipts


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Option 4: private stocks in private storage

Licensing system: RSS of Singapore

A multiple of monthly imports required to bestored in government-designated warehouse

To be rotated by importer

Released by government under emergency


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Little fiscal burden (but imposes cost on

market agents)

Require private sector development

Adequate price volatility

Enabling conditions for investment

Monitoring and information system Strong and effective regulatory system


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Conclusion

Reliance on private storage and private stocks

preferred

Requisite market development takes time to

develop even with government incentives

In the interim: public stocks in private storage

other PPP measures

Toward sustainable and cost-effective

schemes for maintaining adequate reserves


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For information, contact:

Roehl [email protected]

PPT: Complementing Regional Rice Reserves with Novel Domestic Reserve Mechanisms

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