Rice: The Potential for this Commodity for the Future of Thailand - Essay Example

Rice the Rice: The potential for this commodity for the future of Thailand Introduction The FAO (Food and Agricultural Organization of the United Nations) predicts that rice consumption will be up 2.7% in 2010 as the market rebounds form recent declines. In an overall world economy that is still struggling to rise above a failing economy, the promise that rice shows for a growth in the economy of its market shows hope for countries that depend on rice as a staple in their national products. Thailand has a substantial interest in the rice market and must prepare for the coming year with the strength of their ability to provide for the demands that will be put on the stocks of rice. One of the problems that plague the growth of the rice market in 2010 is the rise in the number of natural disasters that have diminished the stock of the grain. Monsoons, earthquakes and landslides have affected the stock, causing an impending possibility of a shortage. The predicted affect of these issues suggests that a 1.9% decrease in production for 2009 has taken place in compared to the growth in 2008. Countries such as Afghanistan, Cambodia, China, Myanmar, Thailand, Korea, and Vietnam have all shown good crops for the year while India , Bangladesh, Taiwan, Iraq, Japan, Nepal, Pakistan, the Philippines and Sri Lanka all saw shorter crop production due to unforeseen circumstance. In a country such as Thailand, using the advantage of surplus in a high demand market must be considered in order to create the most profit for the nation. According to Devries (2001), the demand for rice through the later 20th century grew at a Rice the 3 pace of about 5.6% per year making rice a good prime source of income for a nation (141). According to Science Daily: Science News (2006), rice serves a the largest staple crop, providing 20 percent of the calories that are consumed worldwide. Although 20 percent represents the world, 30 percent represents the Asian market. The cultures in Asia typically consume rice with every meal. According to Toriyanna (2005), Europe consumed 1% of its calories in rice from 1970 to 1990, but in the span of 11 years, that figure had doubles to 2% (8). Most of the rice sold in the world comes from Asia. Ninety-one percent of the market belongs to countries from this part of the world. The other break down of production comes with 3% from South America, 2% from Central and North American, 3% from Africa and 1% from Europe (Toriyama 2005: 10). According to an article in the New York Times (2008), Thailand is the largest exporter of rice in the world holding 30% of the market with jasmine rice being the most coveted style of rice sold out of Thailand. The timing is right in order for Thailand to make a larger than usual profit due to the issues that other nations have had to face which reduced the amount of rice product available to the world market. This research intends to provide a foundation for an increase of production and distribution of rice from Thailand. In creating an understanding of the current market place, the advantages of aggressive handling of the Thailand exports can be expected to increase overall profits. As the market is showing a decrease in available stock, the availability of reserves from Thailand will support larger pricing and increased profits for the nation. Included within the study will be a cost benefit analysis of increasing production and distribution. As well, an analysis of the environmental impact on increasing production will be assessed so that future crops can be protected. An analysis of labor costs and production Rice the 4 feasibilities will help to determine the possibility of increasing the current market share. A commodity chain will allow for an examination of the financial position that will affect the production of more rice from the actual production to the processing. The final type of analysis will consist of LOGIT regression which will include a dependent variable that can signal a probability condition. The probability of adoption will be measured in order to use a set of independent variables that are considered to be relevant to the study. Research Questions The following research questions will be relevant to the proposed study: 1. How is the current market an advantage to Thailand and its trade in rice? 2. What method of price control is most likely going to be of the highest benefit to Thailand in the rice commodities? 3. What economic strategy will give Thailand the best overall advantage in the year 2010 with the projected increases in demand? 4. What effect will the current shortages have on the impact of price control for Thailand? 5. What effect have the recent catastrophes in other countries that produce rice had on the market in regard to Thailand? In working with the statistical evaluations of the economic realities of the current rice Rice the 5 trade, the prospects for Thailand have the potential for a great many positive events. Literature Review History of Rice Rice has its origins back many thousands, extending quite possibly into millions of years. According to Smith and Dilday, the earliest progenitor of rice was a grass that left some evidence of some very distinct form that grew in a variety of humid areas of the southern landmass which is called the Gondwanna supercontinent which would have existed more than 130 million years ago. When the land mass broke apart the grass grew to produce the grain that is known today, one variety being the oryza glaberrima steud, or the African variety, and the more common Asian rice, the o. sativa l (4). Two main varieties of rice are in existence. African and Asian rice are the foundation of all mutated varieties that exist today. African rice is not as popular as the Asian variety. Cultivation of the grain began in the Niger valley within the first populations of agriculturally based communities and has been shown to have grown throughout the African growing communities starting around the year 1500 B. C. (Smith and Dilday 2002: 12). However, the more popular version of the grain that was grown in Asia was brought to the continent by Europeans in the 16th century. Asian rice developed from two central areas, one being in the south regions of Asia and the other being in the eastern regions of Asia. Two main types of rice developed from this diversity. The rice that is generally considered a cooking rice, called sen, has a dryer quality. The other variety which is a sticky rice is called keng. These rice varieties began in provinces of Rice the 6 China, with he stickier version working its way into Japan (Toriyama 2005: 48). Growing Rice There is no time period within the history of agriculture that there was not evidence of the growth of rice. Many generations of human cultivations has created a vastly webbed genetic history for the grain. Rice is a staple in many cultures because of its rich nutrients and healthy carbohydrates. While brown rice is the preferred healthy version of the grain, white rice rates very high on the glycemic index. It is white rice, however, that holds the longer source of history. As this grain is the foundation of many types of nutritional cultures, the demand for the commodity increases the likelihood of it being a successful economic venture for a nation. The most common point of view has been to see that a rice grain is grown in a flooded field, thus flooding is assumed to be needed for the rice to grow. This is not true, however, but the flooding provides a method of controlling the field so that infestations of rodents and weeds will not harm the crop. Most often the fields are put into tiers so that the growing can be controlled and can also work its way up a hillside in vertical ascending levels. The growth of the grain and its cultivation through modern methods does not balance with the cost of petroleum to run the machinery against the costs of cultivation. This would drive the market price up without increasing the profit. Therefore, the grain is still most often harvested by hand and the fields controlled by flooding, thus lowering labor costs and providing a controlled market price. Rice as a Commodity According to early information provided by the OEDC as a projection for the growth of the rice market, the expansion of rice demand was only set to grow by 1.6%. This information was released in early 2009. However, because of the events that took place throughout the year, Rice the 7 this projection was changed and the FAO predicted an expansion of 2.7%. With this new information, new economic decisions must be made in order to support a growth in demand. This can allow for an opportunity to arise for a nation to take its commodity into higher profits. Rice depends on the Asian market for most of its product. According to Barker., Herdt, .Rose, & Rose, 95% of the world average demand for rice is throughout Asia (39). While this percentage can vary according to years linked to the average and through the types of considerations that are used to develop the figure, it is clear that rice is mostly consumed within the Asian market. Rice as a commodity was at record highs in early 2008, but dropped down to reflect norms by about the middle of the year. While the commodity had been down in the market previous to this, it was expected to rebound in 2009 (OED 2009). The expectation was far exceeded and by the end of 2009, the market had not only rebounded, but it is now projected that in 2010 the increase will be far more significant than earlier imagined (FAO 2009) . As a product, rice is a valued and growing market commodity. Rice in Thailand According to Roth (2006), most Thailand farmers own their land and can reap the benefits of a harvest that is profitable (65). As of April 9, 2010, Thailand will be buying up rice in order to increase the price. They estimate they will purchase 900,000 tones of paddy from their farmers so that the price may be better controlled by controlling the supply of rice (Commodity Online). A current change in the way that rice was purchased, a price insurance scheme that took the place of the paddy pledging program, has had millers upset because of plummeting profits that resulted from this change (Commodity Online). This move to purchase the rice is partially Rice the 8 due to the failures of the new program. As stated by the FAO, the price of rice was in late 2009 set to rise as the demand was greater than the supply According to Commodity Online, Thailand as one of the biggest exporters of rice had a great deal of stock in reserve. As of November of 2009, the country was planning on releasing its stockpile to meet the demands of consumers. However, as shown by the decision in April for the government to buy rice from its millers, the release would be calculated with the rise in price controlled. Using this type of a strategy helps for an industry to maintain price control so that the prices neither rise beyond control, or plummet into despair creating lows. Methodology In order to do research on the efforts that Thailand should make in order to take care advantage of the current state of the rice market, both primary and secondary research should be conducted. Secondary research consists of a literature review of the current literature that is available on the topic. The literature review that is contained in this paper was conducted through a search of libraries, online sources, and databases. A search of the relevant literature allows for the work that has bee already done by other researchers to be examined and correlated so that an understanding of the topic can be thoroughly formed. Once the secondary sources have been examined, their relevant content is then grouped into categories and recorded. By placing the sources in grouped categories of information the study will be given a foundation upon which to build relevant conclusions. The main source for the data collection is the FAO (Food and Agricultural Organization of the United Nations), which contained the original information that lead to the investigation of rice production within Rice the 9 Thailand. From that source, the information will be researched through examining the individual components of the information by finding relevant content from additional sources. Once a thorough and concise research of secondary resources has been explored and put into the literature review that is within this paper, a primary source of research will begin. The primary research will be done through a gathering of quantifiable data that can be sorted into mathematical sets of commonalities in order to discover the truths about the topic. Use of such analytical tools including Porters five forces theory, PEST and SWOT analysis will be used and the findings will be assessed for relevant conclusions. According to Ethridge (2004), “Research requires an atmosphere of questioning, seeking, and exploring without constraints on what is discovered “ (p. 12). The act of research should be done without an expectation of the results, but rather an expectation that what will be discovered is new and noteworthy. As the data is collected, it will be done without expectations that it will fit into findings that are preconceived. The data will be collected on the predilection of discovery, rather than on the expectations of a particular result. The type of research that will be done for this study will be considered subject matter research (Ethridge 2004: 22). This type of research is done in order to support practical solutions to a real problem. This type of research provides those who make policy with the resources from which to make decisions. By providing statistical analysis of the topic in question, decisions can be reached based on recommendations that reflect probabilities that have calculable outcomes. As the research has been developed with proofs of specific ideas that will affect public policy, the concepts are given examination from the perspective of actions that might be taken. In other words, the research will recommend or not recommend actions that Thailand might take in order Rice the 10 to support decisions that will take advantage of the current rice market climate. The way in which the methodology is designed will be in attempting to answer the following research questions: Research Questions The following research questions will be relevant to the proposed study: 1. How is the current market an advantage to Thailand and its trade in rice? 2. What method of price control is most likely going to be of the highest benefit to Thailand in the rice commodities? 3. What economic strategy will give Thailand the best overall advantage in the year 2010 with the projected increases in demand? 4. What effect will the current shortages have on the impact of price control for Thailand? 5. What effect have the recent catastrophes in other countries that produce rice had on the market in regard to Thailand? As the data is collected, the answers to these questions will be most relevant to the type of data that is included within the study. Data that is not relevant will not be used and data results that do not show specific answers will be recorded but not used within the study. Rice the 11 Data Collection In order to collect appropriate data for the research, the secondary sources must be further examined to find data that is relevant to the topic. World wide organizations such as the FAO and the OEDC will be farmed for relevant data that can be associated to an increase in the actions of the Thailand government in regard to taking advantage of the higher demands worldwide. In addition, the usage of rice can be promoted through other means of promotion that might also benefit the Thailand rice trade. These methods of increasing specialized versions of rice and limiting the spread of varieties through imitations of their own original, that of Jasmine rice, will increase profits and promote their interests. In collecting data for the research, public sources will be used so that the information is standard and clear. Information that has been tabulated by reliable researchers will be used to create a foundation for the information that is created for the purposes of this study. In collecting data for a study such as this, certain limitations will apply as follows. Limitations The following is a list of limitations that might influence the data collection process, thereby directing false results or results that are less than accurate.. 1. The research will have a negative impact due to the limitations of the researcher in conducting all evaluations. The researcher will have to rely on outside sources for the initial statistics that are used to calculate the results. 2. The results will be limited by the number of resources with relevant information to the topic. 3. The research will be limited by the information that is made public which may or may not Rice the 12 reflect the truth of the current situation in Thailand. The research is limited by the information that is released that is relevant to the work. 4. The market changes daily, as in evidence of the just released information that the Thailand government would be purchasing a great deal of the rice that has been produced in order to control the price. Commodities are not simply a product that is ruled by the concept of simple supply and demand, but a complex web of concepts that must be analyzed before a government makes a decision with the intent of protecting its interests. As this study will depend on the work done by previous researchers and by public information and statistics, the researcher will have to depend on the accuracy of those works and that there are no variables that are not being revealed. As the economy of Thailand depends on the health of its rice trade, the information that is revealed is with the intent of promoting better trade with the advantage of the nation in mind. As the statistics that are used for this research will reflect some of the aspects of Thailand rice commodities, the reliability of those figures will have to be used with the assumption that correct information is available. Data Analysis The secondary sources will be examined for their relevant content and then grouped into categories that can be assessed for information that will create the foundation for the conclusions of the study. The statistics that are compiled from public resources in regard to Thailand rice production will be found through both worldwide organizations and Thailand national resources. Once a thorough and concise research of secondary resources has been explored and put into the literature review that is within this paper, a primary source of research will begin. The primary research will be comprised of analysis that is done through The primary research will be done Rice the 13 through a gathering of quantifiable data that can be sorted into mathematical sets of commonalities in order to discover the truths about the topic. Use of such analytical tools including Porters five forces theory, PEST and SWOT analysis will be used and the findings will be assessed for relevant conclusions. According to Ethridge (2004), “Research requires an atmosphere of questioning, seeking, and exploring without constraints on what is discovered “ (p. 12). The act of research should be done without an expectation of the results, but rather an expectation that what will be discovered is new and noteworthy. As the data is collected, it will be done without expectations that it will fit into findings that are preconceived. The data will be collected on the predilection of discovery, rather than on the expectations of a particular result. The type of research that will be done for this study will be considered subject matter research (Ethridge 2004: 22). This type of research is done in order to support practical solutions to a real problem. This type of research provides those who make policy with the resources from which to make decisions. By providing statistical analysis of the topic in question, decisions can be reached based on recommendations that reflect probabilities that have calculable outcomes. As the research has been developed with proofs of specific ideas that will affect public policy, the concepts are given examination from the perspective of actions that might be taken. In other words, the research will recommend or not recommend actions that Thailand might take in order to support decisions that will take advantage of the current rice market climate. Time scale & plan The time frame for the study will be based on a reasonable amount of time allotted so that Rice the 14 the information can e properly researched and assessed. The first portion of the study will be to thoroughly discover the many secondary resources that are available on the topic of rice in regard to Thailand’s use of the commodity as an economic advantage over the course of the next year. This research should take approximately a week to complete. Another week should be spent creating data streams from which the research will be compiled and conclusions drawn. The third week of the research project will be spent creating statistical conclusions that can be useful to making decisions about the rice exportation from Thailand. The last week of the study will be spent making conclusions and determining the relevant patterns from the statistical analysis that has been made. During this analysis the results of the study will be decided and recorded. Rice the 15 References Barker, R., Herdt, R. W., Rose, B., & Rose, B. (1985). The rice economy of Asia. Washington, D.C., Resources for the Future. “Biologists trace back genetic origins of rice domestication” (12 June 2006). Science daily: Science news. 24 March 2009. Commodity Online (17 November 2009). “Thailand rice stocks come in handy for a rainy day. 9 April 2010. Commodity Online. (9 April 2010). “Thailand to buy rice to ease price pressure” 9 April 2010. Devries, J., & Toenniessen, G. H. (2001). Securing the harvest: biotechnology, breeding, and seed systems for African crops. Wallingford, Oxon, UK, CABI Pub. Ethridge, D. E. (2004). Research methodology in applied economics: organizing, planning, and conducting economic research. Ames, Iowa, Blackwell Pub. Melendez-Ortiz, R. (2005). Trading in genes: development perspectives on biotechnology, trade, and sustainability. London, Earthscan. Roth, H. E. (2006). Politics And Economics of Asia. Nova Science Pub Inc. OECD (2009). OECD-FAO Agricultural Outlook 2009. Organization for Economic Development. Rice: International Prices. (2009). Food and Agricultural Organization of the United Nations. 6 April 2010. Smith, C. W., & Dilday, R. H. (2002). Rice: evolution, history, production, and technology. Wiley series in crop science. New York, Wiley. “Thailand drops idea for rice cartel” (7 May 2008). The New York Times. 4 April 2009. Thomas, H. C. (2006). Trade reforms and food security: country case studies and synthesis. Rome, Food and Agriculture Organization of the United Nations. Toriyama, K., Heong, K., & Hardy, B. (2005). Rice is life: scientific perspectives for the 21st century : proceedings of the World rice research conference, Tsukuba, Japan. Manila, International rice research institute (IRRI). Read More