LCQ18: Supply and prices of rice
Following is a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Frederick Fung Kin-kee in the Legislative Council today (November 30):
It has been reported that the rice production of Thailand, which is the top rice exporting country in the world, has been seriously affected by the recent floods, and it is estimated that the flooded agricultural land in the country accounts for about 14% to 16% of the total agricultural land. It has also been reported that much of this year's harvest has been rotten in the floods, with an estimated loss of seven million tonnes of rice which represented 28% of the total harvest of 25 million tonnes for the whole year. Moreover, the new government has raised the export prices of Thai rice across the board after taking office, and some local importers of Thai rice have indicated that the overall amount of imported Thai rice has reduced by 10% to 20%, and the prices have gone up subsequently. In this connection, will the Government inform this Council:
(a) whether it knows the changes in international rice prices in each of the past 12 months (including the changes in the monthly import and retail prices of rice from Thailand, Mainland, Vietnam and other places, as well as the changes in the differences between such import and retail prices); whether the authorities have assessed the impact of the flooding in Thailand on local rice prices; if they have, of the outcome;
(b) given that some members of the public have relayed to me that while rice from other origins (e.g. Vietnam and Mainland) is already available in the market, its prices are not much lower than those of Thai rice, whether the authorities have looked into the reasons for that; whether the authorities have assessed if the introduction of rice from various origins can stabilise rice prices or has gradually widened the gap between import and retail prices; whether they have uncovered any local wholesalers and retailers jacking up prices indiscriminately for profiteering; if they have, whether such acts reflect that there is insufficient competition in the imported rice market, and what targeted measures the authorities have put in place to prevent retailers from reaping excessive profits, so as to enable the general public to buy rice at reasonable prices; and
(c) whether the authorities will consider exploring regions other than Southeast Asia for the supply of rice, so as to ensure sufficient competition in local rice market and stabilise the supply of rice?
The Government has been closely monitoring the supply and price of rice in Hong Kong. As Thailand and its adjacent areas were recently flooded, the international prices of rice are on an upward trend but its impact on local retail prices is still under observation. Over the first 10 months of 2011, Hong Kong imported 282,900 tonnes of rice, representing an increase of 3.6% when compared with the same period in the previous year. Replies to Questions (a) to (c) are as follows:
(a) On the international prices of rice, according to the figures of the Food and Agriculture Organization of the United Nations, the average price index for rice of the past 12 months was higher than that of the previous 12 months by 11.1%. The monthly price indexes for rice in the past 12 months published by the Food and Agriculture Organization of the United Nations are set out in Annex 1.
By comparing the average price of rice in Hong Kong of the past 12 months with the previous 12 months, the import price of Thai Fragrant rice has increased by 4.99%, similar to the 3.97% increase in retail price. The import price of Chinese See Mew has increased by around 22.8% (Note) while the retail price has increased by 9.02% only. The monthly changes in rice prices vary for different types of rice. For import prices, the monthly changes ranged between -6.43% and +32.1% (Note). As for the retail prices, the range was between -5.43% and +6.11%. The breakdown in import prices and retail prices of Thai Fragrant rice, Chinese See Mew and Vietnamese Fragrant rice over the past 12 months is at Annex 2.
The Government notes that the local prices of rice are under pressure to increase but the actual effect has yet to materialise. The prices of rice are affected by many factors, including currency fluctuations, influence of climate in the rice exporting countries on output and export (e.g. the flooding in Thailand), as well as changes in the operation costs of traders.
(b) In Hong Kong, the rice trade generally operates in a free and market-driven environment. The retail prices depend on the operation costs of traders as well as the supply and demand of the market. In the first 10 months of the current year, the ratio of retail prices to import prices has been maintained at a level between 1.34 and 1.77, which was similar to that of last year and no abnormal fluctuation has been detected. As there is a time gap between rice import and its retail sale due to the time required for transportation, storage and delivery, the retail price may not be able to reflect changes in import price immediately.
Hong Kong has liberalised the rice trade in 2003 by reducing and simplifying control in order to create an open market, attract new entrants, promote competition within the trade and enhance market efficiency, with a view to benefiting consumers and the community as a whole. The number of rice stockholders has increased from about 50 in 2003 to about 150 at present, demonstrating an increased competition in rice trade.
(c) The Government does not impose special control on the source of rice import. Rice stockholders may import rice from different sources according to consumers' demand. As at end October 2011, Thailand, Vietnam and Mainland China accounted for 61%, 28% and 9% respectively of the total rice import of Hong Kong. Other sources of rice supply included Japan, Taiwan, USA and Cambodia. The market share of Thai rice has decreased from 90% in 1997 to 60% as at end October 2011, reflecting that the sources of rice import have spread to many different regions. The Government is glad to see the diversification of rice import sources as it can reduce the risks of over-concentration in supply sources and resulting in more choices for the consumers.
Note: The figure covers the import price of Chinese See Mew in October 2011. In comparison with the import price of the previous month, the import price of Chinese See Mew in that month has increased by 32.1%. However, only two import licence applications were received in that month. In view of the small sample size, the rise in import price may not be able to reflect the full picture of the market. Thus, the figure should only be used for reference.