The Mathematics of Rice: (Putting my big mouth in the people’s rice Palava)—
Some LIB analysis:
1) Global factors: India which is the world’s largest rice supplier at 40%, has placed a ban on rice exports, sending a ripple effect throughout the global supply chain. As a result price has increased leaving number 2 and 3 Vietnam and Thailand to ramp up production.
2) LIB major rice importers are SWAT, UCI, K&K, Fouani, and Fouta. At present, only three are reportedly very active in the game. Most suppliers will not take orders for chartered bulk vessels port to port for less than 12,500 metric tons (500k bags at 25kg). So some importers co-share bulk cargo vessels bringing 25k metric tons or more (1 million bags plus on a single ship).
3) Freight has also gone up globally, still recovering from the impact of the COVID pandemic on global movements of goods as well as the ongoing war in Ukraine which has halted grain exports from that country.
4) Indian parboiled rice (the dominant imported rice) in LIB was trading globally at $796 USD per ton as of end of May 2022 cycle according to trading indexes. This should be the current stock on the market. The average freight to Monrovia is between $75-$80 per ton (negotiable). Marine Insurance is about $2 to $3 per ton. This puts estimated CIF costs at $879 per ton on the high side of freight and MI. Fairly realistic.
5) Since rice is duty free due to annual Executive Order suspensions of import Tariff since 2008 on LIB staple food, the only other costs are port handling charges, transportation, Warehouse handling and collateral management and local finance charges.
— assume port handling & logistics at $6 per ton;
— assume bank financing at $3.50 per ton;
— assume collateral management charges at $1.50 per ton.
6) This puts the ESTIMATED LANDED COST AT $890 USD per Ton.
7) A ton is forty 25kg bags on a pallet. That means each bag is landing at ($890÷40) $22.25 USD or LD 3,338.
This DOES NOT include importers profit margin. Under current market conditions, rice cannot be sold less than the estimated cost of imports of $22.25 per bag absent a government subsidy! That’s the market reality.
Let’s hope the powers that be and the importers can reach an agreement. Otherwise let’s all start picking Plantain and digging Cassava, Edoes and Yams! As for me, I’ve been on our local Country Rice for months.
1 thought on “The Mathematics of Rice: (Putting my big mouth in the people’s rice Palava)—”
RICE! Arguably one of the contributing factors for the downfall of the Tolbert government in 1980.
Not that he needs my affirmation in his treatment of the issue of rice shortage in Liberia, but the long-term solution of this issue is for the private sector to grow rice. The author makes the classic case that would stand in any Econ 101 class: All things being equal, the high cost of a product should encourage many suppliers to enter the market to meet the demand. The more suppliers you have, the greater the competition. The result is price drop. There are many reasons why that does not happen in Liberia. One reason is addressed in his book, “Another America: The Story of Liberia and the former Slaves Who Ruled It” published in 2013 written by James Ciment, PhD. He states that in the pioneering days of Liberia (ca 1822), some of returned the free slaves would rather dress up and walk up and down the unpaved streets of Monrovia than move to any of the surrounding settlements where you could grow anything in the fertile soil. The second reason is that we would rather eat parboiled than “country” rice. I do not know whether there has been a change in mind set. Parents would rather have their children “pick” rice all day, than buy country rice, which was ready to be cooked. One year, a batch of imported rice smelled like shit. However, that was still preferred over country rice. Compare that to aroma of “new” country rice.
Given the cost per bag of rice plus a decent profit coupled with the low barrier to entry, I dare say a farmer who grows rice could do well; however, everyone sits around waiting for the government or the international community (IC) to do something. The sad part is that when the international community steps in to help, people in charge rob the whole thing in the hope that the IC will refill the bucket.
Just as every rainy season, roads will “cut,” we will have the issue of rice for the foreseeable future. Do not be misled by the grandiose speeches of the honorables, because according to his book (which Tubman banned), “If talking made muscles and nerve, the Republic of Liberia would rule the world.” (p. 76) – Liberia, The Inside Story by Luther Henry Lemley, 1963.
Thanks Henrique Caine