Myanmar : Rice Price Reduction and Poverty Reduction

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.