ISSN: 1391 - 0531
Sunday April 13, 2008
Vol. 42 - No 46
Columns - The Sunday Times Economic Analysis  

Should we eat more rice or wheat?

By the Economist

The National New Year is a festive time for eating, visiting, rabban playing, singing, and dancing. These festivities are also a celebration of the harvesting of paddy. The food and sweetmeats at this festive time are mostly rice-based as the traditions date back to a time long before the importation of wheat flour into the country. Therefore there is no need to urge people to eat rice and not wheat during these celebrations. However urging people to eat rice instead of wheat is arguable as we import both rice and wheat. In 2006 we achieved an estimated 97 percent of self-sufficiency at current levels of demand. This level of self sufficiency fell last year with a 6.4 percent decline in paddy production in 2007 compared to the previous year.

The government encouraged people to eat rice, not wheat much before the New Year and is an exhortation that is expected to be followed after the New Year. However the irony is that this year we import rice too as the production of rice in the country has fallen short of the requirements of the population. The Maha harvest of this year is expected to bring in 2,068,000 metric tons of paddy. Even with a good Yala harvest that is predicted the country would require importing at best about 200,000 metric tons of rice. In fact it may turn out to be more than this. It is therefore quite fitting to look at the rice-wheat situation in the country from a longer term perspective.

If one looks at the statistics of cereal consumption over the last four or five decades, several interesting features are seen. One is that per capita consumption of wheat has grown, while per capita consumption of rice has fallen. This phenomenon is common in other rice eating countries of Asia as well. Therefore linking it to PL 480 food Aid is not altogether a correct interpretation. There is a practical aspect to this preference. With urbanisation wheat flour preparations, particularly bread becomes a convenient food for household consumption. Urban homes that have no time for cooking take the easy way out by consuming bread. Another reason for increased wheat flour consumption is the variety of foods that are prepared from wheat flour that have become articles of common consumption as incomes rise. These include cakes, pastries and savouries. It is this that led to per capita consumption of wheat increasing to more than 40 kilograms per capita, while rice consumption fell from over 100 kilograms per capita to around 95 kilograms. Within this trend there were periods when there were shifts from rice to wheat and wheat to rice when relative prices favoured one or other of these cereals. More recently rice consumption has risen to about 104 kilograms per capita.

There are also consumer patterns and certain differences among sections of the population. These are very clearly seen in the consumer statistics of both the surveys of the Central Bank and the household surveys of the Department of Census and Statistics. The sector-wise patterns are that the urban sector’s consumption of wheat was higher than that of the rural areas, and estates were largely wheat-based in their cereal consumption. Despite the latter, when wheat prices have risen sharply relative to rice prices, there has been a noticeable shift to rice even in estate areas. This shift, perhaps reluctantly was in order to cope with the economic realities the estate population faced with their low incomes.

The changes in consumption within the last three to four years are fascinating. When the country’s rice production increased and rice prices fell, there was a shift to rice consumption and once again per capita rice consumption increased to over 100 kilograms per capita. This shift was hailed as rice became virtually a domestically produced commodity, while wheat was entirely an imported one. However, there was some anxiety that the increasing production of paddy could be a possible problem for rice marketing. This fear had little foundation as increased production of paddy could have been absorbed in several ways, one of which was of course the substitution of rice for wheat. Besides this, for paddy production to be adequate for domestic consumption, there has to be a stock of rice built up from the good years to meet the needs of the lean years. Self sufficiency in rice production is not achieved by a single year’s adequate production. This has been demonstrated very clearly. In 2003 paddy production increased to 3071 thousand metric tons but production fell short of domestic needs when it fell to 2628 thousand metric tons. Paddy production increased in the next two years and fell last year and in Maha this year requiring imports.

With all this discussion of self-sufficiency in rice, it must be remembered that a significant proportion of the population do not have adequate food. Estimates vary but there is a consensus that as much as around a third of the population is undernourished. The current situation is threatening as there has been a steep rise in both rice and wheat prices. Then there is the increasing demand owing to the population increases in the coming years. For the next decade or so about 200,000 additional mouths would require to be fed. Therefore a 1 percent increase in production would be needed to meet this increased need in the next decade. Even if there is a surplus after all these needs are met, there is the possibility of using the surplus paddy for other industrial uses that have been hardly exploited as there was no surplus of rice. This includes the conversion to alcohol and bio-fuels, industrial uses and new food products. Therefore the anxiety about an over production of paddy was premature and quite uncalled for.

The current trend of the government encouraging rice consumption may not be economically justified as any increase in rice consumption would lead to an increase in imports of rice. Both rice and wheat are imported commodities and the import of the cheaper commodity would be more favourable. In fact market mechanisms that appear to be highly suspect from the point of view of some policy makers would ensure a rational balance between the two commodities.

A more serious issue with which we will conclude this discussion is whether the decline in wheat consumption actually led to a shift in consumption from wheat to rice or is it that a significant proportion of the population were deprived of both rice and wheat? This may very well be so, as there were sharp increases in prices of both cereals in 2007/2008.

And these increases were on top of large increases in the costs of other basic items of consumption like electricity, gas, transport and other food items. It would not be long when this hypothesis could be tested. If this were so the household food insecurity we referred to earlier is likely to have worsened. A larger proportion of people may not have had access to a sufficient quantity of food for their consumption.

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