A worker carries a bag of rice inside a warehouse in Insein Township in June 2020. (Frontier)

Junta rice scheme grows farmers’ suspicions

With domestic rice prices rising rapidly in Myanmar, the junta has unveiled a US$115 million scheme aimed at boosting production. Some farmers worry that the regime may be looking to hijack the rice market to boost dwindling foreign exchange reserves.

By FRONTIER

“I never thought that the price of rice would increase as much as it has, when it is produced in our own country,” a woman who lives in Pyinmana Township in Nay Pyi Taw told Frontier on August 19. 

As the cost of living crisis hits, forcing ordinary people to tighten their belts, commodity prices have risen across the board in Myanmar. Now, an increase in the cost of the national staple is emerging as a major threat to people’s existence, and could further strain social cohesion.

The rise in the price of rice has been triggered by a fall in supply, caused by multiple factors – disruption to the farming sector, caused by both the impact of a plunging kyat on inputs such as fertiliser, which has become too costly for many farmers, and fighting that has decreased the number of acres under cultivation significantly. It has raised the grim spectre of a rice shortage creating a national food security crisis.

Rice prices began accelerating in July and there is no sign of them easing. In January, depending on quality, prices ranged from roughly K25,000 to K48,000 (US$7-14 at the market exchange rate of K3,500 to the dollar) for a 50kg bag, but by late August they had risen to between K30,000 ($8.50) for standard varieties and K90,000 ($26) for premium quality grain.

“I thought that any increase would be moderate,” said the woman from Nay Pyi Taw. “These days the price of everything is rising. The increasing cost of the price of basic rice which we live on is causing real difficulties for people of limited means like us. We can’t live without eating rice and we can only afford to buy the cheapest kind. The prices of better quality rice are even higher, and are now very expensive,” she added.

The price of rice has swelled this year as domestic production has failed to match demand outside of harvest season, when stocks are typically lower. The Myanmar military’s brutal campaigns in Myanmar’s Dry Zone and other fertile regions have removed hands from farms. Merchants, speculating on a worsening crisis, are stockpiling grain in anticipation of future profits, thereby further lessening supply.

U Myo Tint Htun, deputy permanent secretary of the junta’s Ministry of Agriculture, Livestock and Irrigation, said it was normal for prices to be at their highest in August and September when supply was lowest between the summer and monsoon crops.

“However, since the cost of production is high this year, so is the increase in price,” he admitted.

Increasingly concerned consumers hope that prices will fall after the monsoon crop harvest begins in late November.

The price of paddy

Farmers who spoke to Frontier said that the average price of all varieties of unhusked, harvested rice known as paddy currently ranges from K10,000 to K15,000 ($2.85-4.30) a basket (20.87kg). Following last year’s summer and monsoon harvests, paddy had typically fetched K8,000 a basket.

U Kyi Win, who farms 40 acres of paddy in Ayeyarwady Region’s Maubin Township, said prices were high due to limited supply. “There are only buyers. Most farmers sold their paddy soon after it was harvested because they were short of money. Many sold for around K8,000 a basket ($2.30).”

Although rice prices are higher than last year, higher production costs including labour, pesticides, and agricultural equipment mean that farmers have seen no increase in profit per acre. According to a World Bank study released in July, access to credit has also markedly decreased due to the collapse of Myanmar’s financial sector and the military’s hounding of INGOs and relief charities from the country, leaving farmers with less funding and access to increasingly expensive loans. 

“Compared to past years, profit has remained steady at about K200,000 to K300,000 ($57-86) an acre; it has not risen despite the rise in the paddy price because production costs have risen,” Kyi Win told Frontier on August 21.

As an example of the increase in input costs, a 50 kg bag of nitrate fertiliser for this year’s monsoon crop has increased by over 40 percent.

Farmers said they also expect the cost of having their paddy harvested by machines to rise for the monsoon crop, because fuel is more expensive.

The junta has tried to alleviate the impact of higher input costs. Its Minister of Cooperatives and Rural Development, U Hla Moe, told a meeting of the State Administrative Council on August 23 that his ministry planned to purchase fertiliser and sell it to farmers at a subsidised rate. He did not explain if the plunge in the value of the kyat might complicate efforts to import fertiliser at cheaper prices than those prevailing in the market, and no further details of the fertiliser distribution scheme have been released.

A woman plants rice near a historic brick pagoda in Mrauk-U Township, Rakhine State on August 21. (Hkun Lat | Frontier)
A woman plants rice near a historic brick pagoda in Mrauk-U Township, Rakhine State on August 21. (Hkun Lat | Frontier)

Rice bowl half full

The climate in much of Myanmar is conducive to cultivating rice, which is overwhelmingly the main agricultural crop, with the main growing regions located in Ayeyarwady, Bago and Sagaing regions.

The development of the Ayeyarwady Delta during the British colonial era contributed to the country becoming the world’s biggest producer and exporter of rice in the years before World War II, a distinction gradually lost for a variety of reasons, not least incompetent economic management by the Ne Win regime.

In 2021-2022, Myanmar was ranked by Statista as the world’s seventh largest exporter of rice after India, Vietnam, Thailand, Pakistan, the United States and China. 

The junta-controlled Department of Agriculture has set a range of ambitious targets for the summer and monsoon harvest in key rice-producing regions around Myanmar. 

However, anecdotal evidence strongly suggests the target of 1.8 million acres of cultivation set for Sagaing Region is unlikely to be met — not least because dozens of farming communities have been razed by the military in punitive attacks after fighting with People’s Defence Forces and other resistance groups.

Figures released by independent information monitor Data for Myanmar on August 27 showed that 20,153 of the 28,434 houses torched throughout the country between the coup and August 25 were in Sagaing Region. Large areas of paddy have also been occupied or destroyed by troops.

As prices of the staple continue to rise, there’s concern that fighting and instability will further reduce the area in which paddy can be grown, contributing to even greater shortages in future. 

“In the villages that have been completely destroyed, it isn’t possible to grow any crop, let alone paddy,” said a woman who grows paddy on nine acres (3.6ha) in Sagaing Region’s Kyunhla Township.

“Those who are able try to grow what they can to support themselves. Despite the bad political situation, we tried to grow as much as we could but often had to run for our lives. No one is able to grow what they did before,” said the woman, who said her family was fortunate because their home had not been burnt down.

Transaction costs involved for both farmers and merchants in the rice trade have also swelled due to the increased difficulty of transporting the grain to both national and export markets during ongoing conflict.

Despite the existential challenges posed to rice growers since the coup, Myanmar Rice Association chair U Ye Min Aung told pro-military outlet Popular News Journal on July 22 that the public did not have to worry about a shortage, because enough rice has been stockpiled for the domestic market. He did not disclose how or when these stocks would be released.

Despite repeated attempts, Frontier was unable to contact Ye Min Aung by phone.

U Saing Kyaw, a rice exporter in Mandalay city, said it was noteworthy that with prices at record highs little rice was being sold abroad because exporters were happy to sell on the domestic market. 

Despite the figures, many operating within the sector remain optimistic. 

“Speculators who were stockpiling rice in the hope of reselling at a profit in future should take care,” Saing Kyaw wrote on Facebook in late August. He also indicated that there was no need for consumers to panic buy. “Myanmar is a rice-producing country; there is no need to worry about a shortage,” he wrote. 

Myo Tint Htun, the ministry of agriculture’s deputy permanent secretary, said Myanmar produced an annual surplus of between 5 and 6 million tons a year.

“We don’t have to worry about a shortage as, to August 15 of this year, more than 12 million acres of monsoon paddy had been cultivated,” he said, adding that this year’s target was 17.63 million acres.

A speaker from the Ministry of Economy and Commerce told a conference in August 2019 that, under the National League for Democracy government, paddy cultivation exceeded 17 million acres a year, leaving a surplus of roughly 4 million tons after accounting for domestic consumption. 

In the 2020-2021 fiscal year, capturing eight months of post-coup results, cultivation had already dropped to 16.88 million acres. No figures have been published on rice cultivation acreage since then, but the target of 17.63 million acres may be an ambitious target given the security situation and challenges for farmers around the country.

Some traditional rice growing areas, like Sagaing Region, have emerged as a hotbed of armed conflict, further straining the industry. (Mar Naw | Frontier)

Junta announces intervention to boost yields

Senior General Min Aung Hlaing has given indications that he also now fears Myanmar may not be able to meet domestic demand quotas for the staple. The junta leader openly raised concern about the possibility of a shortage during an August 9 meeting of the State Administration Council in which he said that farmers were failing to hit output targets. 

During the meeting he openly called for an increase in yields. “Taking into account the acreage under cultivation, rice set aside for export and the balance of rice in reserve, the surplus is not plentiful so we need to be cautious,” he said.

“The current estimated monsoon paddy yield could be about 75 baskets and that of summer paddy could be about 90 baskets an acre. If we could increase the yield of the summer and monsoon crops by five baskets, another 90 million baskets could be produced,” he added.

To achieve the targeted yield increase it was essential that junta departments support farmers so they can acquire necessary inputs, such as fertilisers and insecticides, and have access to enough irrigation water for their fields, the senior general said.

“The income could be used to import inputs such as fertiliser and pesticides, as well as agricultural machinery,” he mused.

Farmers say per acre yields in a normal year are typically 70 baskets for the monsoon harvest and about 90 baskets in summer.

Daw Tin Moe Khine, who grows paddy on 13 acres in Nay Pyi Taw’s Zabuthiri Township, said the yield increase sought by Min Aung Hlaing could theoretically be achieved with sufficient applications of fertiliser and good weather. 

“But since the coup, it is difficult for farmers to achieve the yield increase,” she said, adding that it was also difficult to precisely estimate yields.

Min Aung Hlaing revisited the topic of yields at an SAC meeting on August 22, saying that Vietnam, Thailand and Myanmar were the main rice-exporting countries in the 10-member Association of Southeast Asian Nations, but that yields in Myanmar were lower than those of its two competitors. This time, he increased the targets even further.

“I want to set a target of 100 baskets an acre for summer paddy and 80 baskets an acre for monsoon paddy. Farmers and the relevant government departments must cooperate and try their best to achieve these targets. If we can export more rice, foreign exchange earnings will increase and farmers will benefit,” he said.

Disaster funding for agricultural sector

Min Aung Hlaing is known to discuss Myanmar’s agricultural and livestock sector at almost every meeting of the SAC. At the August 9 meeting he also announced that the junta would dip into the country’s National Disaster Management Fund and create a reserve of K400 billion ($115 million) to develop the ailing farm sector. Drawing on national disaster funding highlights the seriousness of the agricultural sector crisis, even it fails to acknowledge the extent to which the disaster has been fomented by the actions of the military itself.

The money, the junta leader proposed, would be used to buy fertiliser, paddy seeds, farm machinery and fuel for harvesting and transporting the summer paddy and green gram (mung bean) crops.

The paddy and green gram would then be exported under the supervision of the regime, with farmers receiving a “reasonable share of the profits”, he said, adding that the social and economic circumstances of farmers would improve as they would no longer be required to sink their own funds into inputs and other growing costs.

Elaborating, Myo Tint Tun from the agriculture ministry said K230 billion ($65.7 million) would be allocated from the fund to support the cultivation of 0.85 million acres of summer paddy and 0.5 million acres of green gram under a contract growing system. The balance of the K400 billion would go towards other agricultural and livestock raising activities.

He said that a body would be formed of exporters, rice traders and millers and fertiliser importers to implement the contract system, which would require farmers to sign loan agreements. Frontier attempted to contact Myo Tint Tun to confirm this statement, but he did not answer the call.

“The K230 billion will go to the body formed with entrepreneurs who will distribute loans to farmers who, in turn, will contract to sell their crops back to the entrepreneurs. Farmers will use their earnings to repay the loans and the body will then repay the government. The farmers will sell their crops to the entrepreneurs at the market price; we will take care not to put them at a disadvantage,” Myo Tint Tun said.

He said regional and state administrations will decide which farmers would be eligible for the loans. Loans to grow paddy will be disbursed in the seven regions and those for green gram will go to farmers in Yangon, Bago and Ayeyarwady regions.

“The project is aimed at enabling entrepreneurs and farmers to work more efficiently. As the entrepreneurs will have extra funds, they will be able to distribute more money to farmers, and the farmers will not have to worry about using their own money to invest in crop production. It is beneficial for both sides,” Myo Tint Tun said.

Min Aung Hlaing told the August 22 meeting that the K400 million cash injection would benefit the country and help boost liquidity in the sector.

“Holding money is not good; it is best if it is circulating,” he said.

U San Hlaing, who farms 15 acres of paddy in Mandalay Region’s Madaya Township, was lukewarm about the project and concerned about the possibility of corruption.

“As state and regional governments will choose the farmers who receive loans, I think there might be corruption in whom they choose. I’d also point out that 400 billion kyat is not a lot of money,” he told Frontier on August 21.

Emulating bygone regimes

There’s suspicion among some farmers that the junta might be trying to control the paddy market. Despite a recent slump in rice exports, the grain is a significant earner of foreign exchange, of which the military regime is now in dire need.

Suspicions were aroused when Min Aung Hlaing noted the requirement that paddy and green gram grown under the proposed project must be exported under junta supervision.

A few days earlier, on August 17, junta spokesperson Major-General Zaw Min Tun had told a news conference that increasing the monsoon and summer paddy yield could increase export earnings by at least US$350 million at current market rates, numbers backed by prices provided by the Myanmar Rice Association. Min Aung Hlaing’s interest in the sector is, some farmers believe, therefore no coincidence.

“They [the junta] may take the foreign currency earned from the additional sales and not let anyone else hold it,” said San Hlaing, who expressed reservations that the contract system might allow the junta or entrepreneurs to set the prices at which they buy from farmers and not share the export proceeds. “It might be like the situation we found ourselves in during the socialist era, when farmers were required to sell their crops to the government. If that happens, the market economy will disappear,” he argued.

His concerns were echoed by a woman who grows rice in Magway Region’s Myaing Township. “Under former military governments, farmers had no choice but to sell their crops to the government, which paid lower than the market price,” she said.

“During the rule of one of the past regimes, farmers were forced to hand a portion of the harvest to the government for free. I remember people going over to the village tract administrator’s house to hand over some of their crops; we don’t want to go back to those times,” she said.

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