CAIRO: The state renewed its ban on rice exports on Wednesday, signaling that while domestic prices have fallen in recent months, they still have a good way to go.
Egypt halted rice exports last April after commodity prices shot up across the world. Other rice-growing nations, such as Vietnam and India, enacted similar policies to try to control domestic food inflation, despite the criticism these acts garnered from economists and rice buyers, who accused politicians of enacting “beggar-thy-neighbor policies.
Worldwide commodity prices have since subsided as the economic crisis has spread. Countries such as Cambodia, Vietnam and India have removed or eased their bans.
Egypt’s ban, enacted in April 2008, was originally intended to last six months. It was renewed for the period from October through April, and will now continue indefinitely.
This, analysts say, is because prices have stayed high here. While recent statistics have not been released for Egyptian prices, they reportedly hover well above the international rate of about $330 per ton. Sellers in markets such as Myanmar have reported prices as low as $230 per ton in recent months.
This gap persists despite the fact that Egypt grows more than enough rice to meet domestic demand. In recent years, Egypt has exported as much as 1.4 million tons of rice.
The state-owned newspaper Al-Ahram reported that the new ban was put in place to ensure that there would be sufficient rice for the state’s ration card program. In a statement, the Trade Ministry said that they were renewing the ban to ensure domestic supply would remain ample.
So why is the price so high and supply so low even as commodity prices tumble abroad and Egypt continues to grow more than it can eat? There are a few possible answers.
Some merchants, expecting that prices will rise again later, could be hoarding their stock, thereby artificially depressing the supply and inflating the price. Hoarding has historically been a problem with commodities like steel in Egypt, though the lack of reliable statistics makes it hard to guess exactly how much it affects a given market.
People could also be eating more rice than was expected. If consumption is unusually strong, it could account for the still-high prices in Egypt. But any increase there would probably not be enough to explain the whole situation.
It is also possible that efforts to enforce the ban have not been less than effective. It is possible, some analysts now suggest, that companies continued to export rice well into last year.
In its statement, the ministry announced that some companies would now be allowed to export rice if they import the same amount for government programs. But even these exporters will have to pay a higher duty, which the ministry has raised from LE 300 to LE 1,000 per ton, making the prospect of selling abroad far less attractive.
All of this suggests that Egypt will be selling little or no rice abroad for some time. This is likely to spark criticism from economists concerned that export bans and duties distort international markets, discourage farmers from growing and jack up prices in buyer markets. As one of the world’s largest rice exporters, Egypt’s actions are not likely to escape attention.
Trade bans are not ideal. They tend to ignore more systemic problems while costing revenue and raising the ire of economists and foreign buyers. But as long as prices stay high, authorities here may have few other short-term tools at their disposal.
