Rice Trade:the Competitiveness And Market Power Amongst Major Exporters And Importers

Rice is believed to have fed and nourished over half of the world's population.It has,from its origin of production reached almost every corner of the world via trade.About 90 percent of the rice produced in the world comes from Asia and the remaining from other parts of the world.It is consumed in both producing and non-producing countries(like Saudi Arabia).Its consumption has been attributed to food security especially in Asia where it is a staple food.The importance of rice is also increasingly noticed in other parts of the world especially in Africa(importer of about 27 percent of the global traded rice).The global rice market as defined by its small number of exporters and a small number of dominant importers is vulnerable to imperfect competition and an imperfect competitive market is vulnerable to volatility.During the 2007-2008 global market crisis,rice trade met it share of volatility which sparked researchers and governments to put more effort to studying the phenomenon especially how it affect the economies of the developing countries(rice producers and/or consumers alike)to provide policies that can take advantage or prevent/reduce any circumstance ahead.The contribution of the some of the top rice exporters/producers during the market crisis and the involvement of the major importers cannot be overemphasized enough.This brings to the challenge of questioning the degree of influence an exporter might have over price and/or quantity of rice traded globally.This study utilizes a 23 year times series data from 1991 to 2013 to firstly analyze the competitiveness of four major rice exporters including Thailand,India,United State of America and Pakistan using Porter Michael's components of competitive advantage.Inclusive to this analysis are the evaluation of the competitive component in five rice major importing countries including Nigeria,Indonesia,Iran,and the Philippines.Secondly,to measure the power of the exporting countries,this study adopts Residual Demand Elasticity(RDE)model which not only allow for the identification of the existence of market power but also measures the extent of the market power by analyzing significant factors influencing rice export prices in selected market.The findings of the study reveal that USA has the least cost of production of paddy while Thailand takes lead in terms of cost of producing milled rice.USA also led the group in terms of minimal transportation cost followed by Thailand,India and then Pakistan.On technology – productivity of rice seed,farm mechanization and milling rate;USA by far tops the group.Transportation cost which is the timing and cost to export,USA topped the group.On the aspect of relying on constant supply of rice into the market,Pakistan topped the group and this was a result of it is low rice consumer compared to other exporters.The result of measuring the market power of the exporting countries shows that all the exporters have no ability to manipulate price in any of the markets except in one market(i.e.the Saudi Arabian market)where only the RDE of USA was negative and statistically significant and at 10 percent level of confidence,an indication of market power US exercises trivial market power.The results on factors affecting export prices,factors such as bilateral exchange rate,Producer Price Index of the competing exporters,Consumer Price Index and GDP of the importing market influences the export prices from the exporting countries to the importing countries.The results of the study provide important implications for policy makers by encouraging them to take advantage of the strength and reducing the weaknesses of their rice industry.