Global Rice Prices Soared after India Bans Rice Exports; What About the Impact on Indonesia?

Besides consumption, Asia also plays a crucial role in terms of global rice production. In fact, it is estimated that more than 90 percent of global rice is not only consumed in Asia but is also produced across Asia.

Indeed, it is true that rice does have a centuries-long history in the West, and so there also developed specific European rice culinary specialties, such as risotto (in Italy) or paella (in Spain). However, compared to Asia, rice consumption and production are rather insignificant in the West. And so, (rice-producing) Asia is the net exporter of rice to the rest of the world and at the same time the key market.

Asia Dominates the World’s Production and Consumption of Rice

There are several climate-related and socio-economic reasons behind Asia being the world’s biggest producer and consumer of rice.

Firstly, rice cultivation is well-suited in regions that enjoy a hot and humid climate. Warm temperatures, plenty of sunshine, and heavy rainfall (or ample water supplies from other sources than rain) are optimal conditions for rice to grow. These climate-related conditions can be found in the tropical and sub-tropical climates of Asia.

However, these conditions are not exclusively found in Asia. Other parts of the world also enjoy these humid (sub) tropical climates. So, how come their rice consumption and production lag (far) behind Asia? Well, there are several socio-economic as well as socio-cultural factors at play here.

Rice cultivation certainly is a labor-intensive activity (intensive farming techniques are required), and thus having a low labor cost environment is important. The cost of labor involves wages paid to workers, but also the costs of specific worker benefits and payroll taxes that are typically paid by an employer. However, in Indonesia (and many other parts of Asia), those who work in the paddy field are informal workers who perform their duty for a small wage (and do not receive employee benefits such as health insurance). Indeed, a characteristic shared by Asian rice farmers is that the majority originates from poor environments and live in underdeveloped conditions.

Meanwhile, for the huge (and rapidly growing) populations in Asia – many of whom live in poor conditions – rice is the most affordable staple food crop, supported by big production and low production costs (and in some cases – including Indonesia – public assistance spending). Of the world’s three major crops (rice, corn and wheat), rice is (by far) the most important in terms of (human) consumption in the low and lower middle income countries. As the poorer segments in Asian societies have very limited spending power to buy a variety – and big quantity – of side dishes, they tend to combine one or two (small) side dishes with a lot of rice to fill their stomachs on a daily basis.

The world’s biggest rice producers are China and India. But while China’s harvested area is smaller than that of India, China’s rice production is greater amid the higher yields as nearly all of China’s rice fields are irrigated, whereas less than half of India’s rice area is irrigated. However, unlike India, China does not export a lot of rice.

After China and India, the world’s largest rice producers are Bangladesh, Indonesia, Vietnam, Thailand, and the Philippines. Together, these seven biggest rice producing countries account for more than 80 percent of global rice production. And, it is not a coincidence that these countries are all located in Asia.

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