With the issue of escalating population size confronting many Asian nations, food crisis is increasingly imminent in Asia. With Asia's population growing by around 56 million annually, domestic demand for rice is expected to top 770 million tonnes by the year 2025.The establishment of a futures market for rice could facilitate in the stabilisation of prices and enhance food security within Asia 
as 65% of the people who live in this region are living in hunger. A futures market refers to one where the participants would buy and sell contracts for financial instruments and commodities to guard themselves against long term price fluctuations.
The risk of food crisis led to International Rice Research Institute (IRRI) to lower the risk by increasing the amount of rice reserves, especially in large Asian countries that are enthusiastic in maintaining more stable food pricing. This would be critical after the global food crisis that struck between 2007 and 2008 which saw the rapid depletion of global rice buffer stocks. Furthermore, the major rice producers such as Thailand were concerned about domestic supply squeezes and imposed export curbs, hence further straining global availability of rice supplies.
The recent bad weather conditions such as the storms that struck the Philippines in late 2009, severe monsoons in India and torrential downpour and massive flooding in China since June 2010 put the focus back onto food security of the staples in the Asian region. The world’s biggest importer of rice – The Philippines had been badly affected by the dry season during the El Nino period in 2010, putting greater pressure on food supplies as substantial production losses were incurred due to the bad weather conditions.
To aggravate matters, rice plots in Asia are diminishing due to the immense pressure brought about by industrialisation and urbanisation. For instance, China’s rice cultivation lands fell from 37 million ha in 1976 to 31 million ha in 1996. Problems such as waterlogging, soil salinisation and other forms of degradation associated with intensive rice cropping led to declines in Asia’s total irrigated lands. Across nations within Asia, a trend of the ‘greying’ of Asia’s rice farming populace is also observed. The average age of farmers is increasing in almost every country, in parallel with its rate of industrialization. In Korea, the number of rice farmers fell by two-thirds between 1965 and 1995. Urbanization and industrialization will further reduce the labour force, push up farm wages, increase farm size, and increase pressure for mechanization.
As IRRI is aware that it would be a challenge to maintain a large rice reserve with the high cost of maintenance, they see the potential of establishing a futures market in Singapore to promote greater stability and transparency in the rice market. However, the extent of success would depend on the presence of a regulatory framework that protects legal contracts. Traders would also require access to a modern, well capitalised financial market to facilitate purchases and sales. making Singapore a conducive site for locating such operations and transactions. Despite the plausible benefits that a futures market entails, it is important to note that there are also notorious arenas for financial speculation which could also lead to upward spiralling of rice prices.
References:
- McIndoe, A. The Straits Times (September 29, 2010). ‘Singapore rice futures market may help region’.
- www.prb.org
- http://www.fao.org/ag/magazine/9809/spot1.htm
- http://news.bbc.co.uk/2/hi/south_asia/7324596.stm
