Research group warns that South Africa is likely to see sharp rise in price of riceĀ 

9th April 2020 By: Rebecca Campbell - Creamer Media Senior Deputy Editor

Global trade has been severely disrupted by the Covid-19 pandemic and the measures many governments have taken to contain the disease. In general, however, trade in food and associated essential goods has been given priority in order to maintain food security, independent research group the Bureau of Food and Agricultural Policy (BFAP) pointed out in its recent brief report 'Impact of Covid-19: Changing trade policy in a global pandemic – Potential implications for South Africa’s rice supply chain'.

“However,” warned the bureau, “disruptions in global supply chains are inevitable, especially given restrictions on the movement of labour, a slow-down in logistics, and stringent health inspections to ensure safe operating environments. There are fears that such disruptions could lead to temporary price shocks and constraints for some of the country’s major imports such as rice, wheat and palm oil.”

Focusing on rice, South Africa normally imported more than one-million tons of this staple food every year. In 2018, these imports were worth R6.8-billion (or $518-million). Of these imports, 61% came from Thailand and 27% from India. China and Vietnam accounted for 2% each, while “others” were responsible for the remaining 8%. Interestingly, South African rice imports were not evenly spread throughout the year. They were lowest during the first quarter of each year, rising steadily (but not uniformly) throughout the year, to peak in the fourth quarter. Thus South African rice imports were currently relatively low, but were increasing.

On March 28, Vietnam introduced a ban on rice exports, to protect its domestic food supply. To reiterate – Vietnam is only a minor source of rice for South Africa, so this ban was of little concern regarding South Africa’s security of rice supply. However, Vietnam was the third biggest exporter of rice in the world (behind Thailand and India). Hanoi’s announcement of its export ban immediately drove world rice prices upwards. The price of Thai rice, per ton, jumped sharply in dollar terms and even more sharply in rand terms. The coincidental depreciation of the rand against the dollar worsened matters. Thus, BFAP highlighted, Vietnam’s export band created an issue for South Africa not regarding the availability of rice but regarding the affordability of rice. 

“For the lockdown period, retailers in South Africa are not allowed to increase the price of essential food items,” noted the bureau. “Companies are generally well hedged for a month of two to absorb higher raw material prices. However, in a prolonged Covid-19 situation, the affordability of rice could become an issue. The value chain will not be able to absorb a 30-40 percent increase in raw material prices. Similarly, low-income households that are already spending a significant share of their income on food will be under even more pressure.”

South Africa had to monitor Covid-19-related food policy developments in Thailand and India (as well as in other countries from which South Africa imported food and related products). Thailand had assured that it would not be banning the export of rice. But that could change radically, depending on the spread of the disease in that country or its neighbours. The spread of the disease could also affect Indian policy.

The cheaper alternative to rice (and wheat) for South Africans was maize meal. The country had enough white maize to accommodate a major shift in consumption from rice and wheat to maize meal. However, depending on the scale of such a shift in demand, there could be impacts on the maize prices, a staple food for South Africans.