MONROVIA – The Joseph Boakai administration faces mounting pressure to agree to rice importers’ demands for a price hike on the nation’s staple food. Failure to comply could result in a severe shortage, as importers threaten to withhold supplies until their demands are met.
By Lennart Dodoo, [email protected]
FrontPageAfrica has gathered that the rice importers have written to the Ministry of Commerce and Industry, proposing a minimum price of US$20 per 25kg bag of parboiled rice. They argue this increment is necessary to offset the rising cost of importing rice to Liberia.
FrontPageAfrica has seen a communication from K & K Trading Corp. to the Minister of Commerce, outlining the challenges they are facing and the losses they continue to incur while the Liberian government delays the price increment on the local market.
K&K Corp stated: “Regrettably, due to the price hike for rice from the origin country and other operational challenges, we find ourselves in a position where we are selling the rice at a significant loss.
“The situation is indeed dire, and the continued sale of rice at the current prices poses a risk of incurring substantial losses for us. Therefore, we humbly urge you to expedite the implementation of the price increase to a minimum of US$20 per bag at your earliest convenience. Doing so would not only alleviate the financial burden on importers but also ensure the sustainability of our operations and the stability of the rice market in Liberia.”
This negotiation has been ongoing since February this year. However, the Boakai-led administration, despite initially giving the importers some assurance of an increment, has been dealing with the situation delicately, knowing that rice is a political commodity in Liberia.
Why the Increment in Price
In February, India extended a 20% export tax on parboiled rice indefinitely. Initially imposed in August last year and intended to last until March 31, 2024, the measure by the Indian government was intended to ensure sufficient local stock and stabilize domestic prices in India. This tax increase on rice exported from India is now dealing a significant blow to Liberian importers.
In October 2023, Liberian rice importers requested an increase in the rice price from US$17.50 to $20, citing rising costs. However, this request was not fulfilled due to political considerations during the election period. Again in February, the importers outlined reasons for their price increase request, including the additional 20% charge from the Indian export tax and increased transportation costs due to longer shipping routes caused by the war in the Middle East.
Despite the financial pressures, the Liberian government and importers initially agreed to reduce the price to US$16.50 and focus on local rice production investments. This agreement was contingent on observing if the Indian government would reduce tariffs, which did not happen.
By May 14, 2024, importers again requested a price increase to US$20, citing the continued 20% export tax and an additional 4% increase imposed by the Indian government. These increases, coupled with prior logistical challenges and cost increases, made it inevitable to raise the rice price to $18.50. This increase aims to cover the heightened costs while ensuring no shortages and maintaining different varieties of rice at a lower price on the local market.
FrontPageAfrica gathered that the importers, during the negotiation, also committed to investing in local rice production, initially pledging US$200,000 with intentions to increase investment. The Ministry of Commerce hopes that this could mitigate reliance on imported rice and stabilize local rice prices in the long term.
The World Bank in its commodity report in 2023 had predicted that the price of rice would increase by a further 6 percent in 2024, underpinned by “the threat of El Niño, policy responses from significant exporters and importers, and the geographic and market concentrations of rice production and exports.”
The World Bank predicted, “Rice prices will remain high into 2024, assuming India maintains its export restrictions. The outlook assumes a moderate-to-strong El Niño.”
The bank’s commodity report published on Oct. 30 said rice prices had reached their highest point in the third quarter of 2023 since the 2007-2008 food crises due to the Hamas-Israel conflict and El Niño.
While India’s controls benefit its own consumers, for the billions elsewhere in Asia and in Africa who depend on a stable rice supply, continued high prices could increase food insecurity.
In Nigeria, the cost of rice increased by 61% from September through November last year and continues to experience increments in prices.
El Niño is a climate event that can cause extreme weather events around the world, including droughts, wildfires, heatwaves, flooding, and tropical storms. It occurs when warmer water spreads further and stays closer to the surface of the ocean, releasing more heat into the atmosphere and creating warmer and wetter air.