The average export–output ratio, a measure of tradability or the extent of exchange of output between and among countries, is the thinnest for rice relative to two other important food staples, maize and wheat. From 1961 to 2009, the average export-to-output ratio of rice was only 5% while wheat was, 19%, and maize, 14%. 

Is 5% too thin for comfort? Yes, especially when you factor in price volatility.

Prices move up and down, depending on changes in weather, increase in demand, etc. That prices are not constant serves as the incentive for suppliers and distributors to produce more or less of a food staple. Too high prices or too low prices are dangerous either way. Some economists have a barometer for it: a figure beyond the 2.5% price volatility range is a red sign. Of the three food staples, rice displayed the highest and most frequent price volatility for 1960–2010, averaging 66%. 

Our recent study on rice trade and price volatility (Clarete, Adriano, Esteban forthcoming) shows that for maize and wheat, price volatility is positively related to tradability. This means that trade is not too thin, as there is more openness to exchanging these goods between countries especially during sudden upward and downward price surges.

What would it take for Southeast Asia, which hosts the world’s biggest rice exporters and importers, to regain its confidence in external rice trade?

In contrast, rice price volatility is negatively related to tradability. This means that rice trade has become too thin as price volatility self-perpetuates its dampening effect on trade. In 2008, top rice exporters such as Vietnam cut rice exports to insulate their economy from excessive price fluctuations. These export restrictions helped feed the crisis, which in turn hardened the resolve of rice-deficit countries to look at rice trade as the last resort for ensuring food security. 

Southeast Asia’s biggest net rice-importing countries—Indonesia, Malaysia, and the Philippines—including tiny rice importer Brunei Darussalam, are reinvigorating self-sufficiency programs in rice to insure themselves against the risk of relying on thin trade for their rice requirements each year. 

What would it take for Southeast Asia, which hosts the world’s biggest rice exporters and importers, to regain its confidence in external rice trade? 

The good news is we can all give trade a chance. 

Launched in 2009, the Association of Southeast Asian Nations (ASEAN) integrated food security program is a regional public good that provides a menu of policies for reducing excessive price volatility and for serving as an alternative to autarkic rice policies.

The most novel approaches the ASEAN has introduced are the regional rice reserve, the multi-stakeholder rice trade forum, and market information and sharing. These approaches have the potential of building confidence in rice trade. 

In April 2008, when the rice prices in the world market spiked by as much as 150% from the December 2007 level, I saw long queues of people waiting for hours under the sun, just to be able to buy 2 to 5 kilos of rice at a discounted price. This should not happen again. Let’s give the ASEAN food security program a chance to bring up the level of rice trade from 5% to at least 10%.