Myanmar : Rice Price Reduction and Poverty Reduction

Abstract

Myanmar is a low-income agrarian country
 with a high poverty rate. The livelihood of many poor people
 depends on the performance of agriculture, especially the
 rice sector. Rice accounts for 70 percent of Myanmar s total
 cultivated area and 30 percent of the value of its
 agricultural production. Increasing returns to rice
 production will be the key to increasing farm wages and
 incomes in the short to medium run. Higher rice production
 will also help maintain low food prices, improve food
 security, and reduce poverty, as an average household spends
 61 percent of total household income on food, and rice is a
 major component of the food basket. Price fluctuations are a
 common feature of well-functioning agricultural markets.
 Price fluctuation should be expected in such markets, since
 output varies from period to period due to factors such as
 weather, pests and disease, and because demand and supply
 are inelastic in the short run. Moreover, some amount of
 seasonal and spatial price movements should be tolerated,
 since these usefully signal scarcity in the market and
 facilitate a supply response, foster arbitrage between
 surplus and deficit regions, as well as guide post-harvest
 handling, storage and trade decisions. However, in the case
 of Myanmar s rice market, several factors serve to
 exacerbate price fluctuation and make them more pronounced
 and unpredictable (volatile) and lead to serious negative
 impacts for consumers and farmers. Rice price volatility is
 of concern to the Myanmar government given the high
 importance of rice for farm incomes and consumer
 expenditures, and thereby for food security and poverty
 reduction. On the production side, prices volatility
 inhibits farmers supply response and is a disincentive for
 greater use of purchased inputs and increased investments.
 Volatility can also discourage rice-producing farmers to
 diversify their cropping patterns to high-value crops if
 they cannot buy cereals for consumption at more predictable
 prices. On the consumption side, rice price spikes can cause
 increased food insecurity for those not wealthy enough to
 maintain consumption levels at the higher prices. For people
 spending 50 percent of their income on rice, a 20 percent
 temporary increase in rice prices would lead to an
 approximate 10 percent decline in effective income. This is
 a large shock, often equivalent to households spending on
 health and education.