The most debated events of the recent times have been the rise in the price of oil and rice. Both are quintessential in this hungry world . Rice is a staple food in much of Asia and is key to the food security of atleast half the world. While oil is traded through cartels by Organisation of the Petroleum exporting countries (OPEC), a 12 member intergovernmental organisation which fixes the production quantity and the price, rice trade has not been organised . The main reasons were unhindered availability and relatively lower cost.
The recent events seem to have changed this forever. The price of rice has doubled from about $500 to $998 a tonne since january this year, mostly due to acute shortage coupled with export restictions in countries like China and India. Although talks of forming a cartel to control prices were underway even in 2002, the recent price rise has brought back the focus on such an arrangement. South east Asian nations -Thailand, Vietnam, Cambodia, Laos and Myanmar- have agreed in principle to form an Organisation of Rice Exporting Countries (OREC). If this is a step towards ensuring the availability of rice and stability of price, it is a commendable move, as majority of the developing nations will not have to face such severe crisis both in terms of availabilty as well as economics of addressing such issues.
However, if the purpose of this organisation is to maintian the rice price at current levels, then it may be difficult to succeed. Major rice producers like China (27%) and India (21%) have the ability to increase production which will create a surplus and effect the availability. However, if China and India too join this cartel, then the higher prices could force the major importers to look at alternatives and increase local production which would harm the exports of the OREC countries.
