How Integrated Are Rice Markets in Asia? Effects of Crises and Rice Export Quality on Price Shock Transmission

Rising and unstable prices of rice and other staple foods threaten the food security of millions worldwide. These fluctuations raise concerns about market response to price changes, especially regarding incentives for food production. This study investigates how the price dynamics in the Asian rice markets are affected by crises in low-quality rice by analysing monthly export price data for 25% broken rice for Vietnam, Thailand, India, and Pakistan. We test the rice price transmission and rice market integration of these countries using a vector autoregression (VAR) model. The results reveal a tendency for price signals to move together across our sample countries, despite variations in their rice production and consumption patterns. This suggests that rice price shocks are transmitted between Asian exporting countries, particularly for low-quality rice. Furthermore, our analysis suggests that price dynamics in these markets are primarily influenced by crises affecting domestic agro-food chains and government policies related to price and trade. To improve production incentives during crises, governments could promote competition among traders, wholesalers, and input providers, and support farmers' income through supply oriented policies, including input vouchers and agricultural credit. These policies can mitigate price and trade distortions that can negatively affect price incentives and food security.