What Is a Reasonable Price for Rice? Starting from Production Costs
Over the past three or four months, rice prices have kept climbing. The Agriculture and Food Agency of the Council of Agriculture has successively released public grain to stabilize rice prices. The day before yesterday (3/13), the Agriculture and Food Agency held its seventh public grain auction; combined with the previous six auctions, a total of 97,184 metric tons of public grain had been released. Yet over these three or four months, white rice prices have continued to rise; yesterday the retail price of japonica (Penglai) white rice was 41.99 yuan/kg. Farmers, however, believe that the price should be examined from the perspective of "the production cost of rice," and that the current rice price is not really too expensive.
As long as it is genuinely Taiwanese rice, the current price is not expensive
In recent years, Taiwan's per capita annual white rice consumption has declined year by year. In 1981, each person ate 98 kg of white rice per year, but by 2011, each person ate only 45 kg of white rice per year.
Lee Lin-chin, director-general of the Wujie Township Farmers' Association in Yilan County, said that with people eating 45 kg of white rice per person per year, 1 kg of white rice can cook 13.5 bowls of rice (calculated at 75 grams per bowl). A family of four eating one bowl of rice at each of three meals would eat twelve bowls of rice in a day, still less than 1 kg.
Lee Lin-chin said, "A family of four eating rice at all three meals still eats only nearly 1 kg of rice, costing less than 40 yuan; after the price increase, they might spend one or two yuan more. When we go to a convenience store to buy bottled water, one bottle costs 20 yuan, and a person can drink two or three bottles of water a day, but can a person eat 2 kg of rice a day?"
Yang Kuei-chuan, retired secretary of the Houbi District Farmers' Association in Tainan City, said that the cost of rice, added up across planting, drying, milling, packaging, sales and other stages, comes to about 37 or 38 yuan per kg.
Four years after retiring from the farmers' association, Yang Kuei-chuan also farms in practice, growing Taikeng No. 16. He said that calculating on the basis of 1 hectare of farmland, if both rice crops in a year have a good harvest, one can earn roughly more than 120,000. If a farmer wants to make a living solely from farming, he must plant at least 5 hectares or more. Otherwise, one has to adopt natural farming; although the yield may be only 50% to 60% of conventionally grown rice, the selling price is roughly three to four times that of conventionally grown rice.
Yang Kuei-chuan believes that rice prices were low in the past, partly because some processors mixed in low-cost imported rice. "If it is really sold as Taiwanese rice, 41 yuan per kg is a reasonable price. The current rice price does let farmers and grain merchants earn a bit more, but it is absolutely not possible for it to be exorbitant profit."
Rice prices have not soared; they merely reflect production costs
The Agriculture and Food Agency believes that last year's rice crop was affected by rice blast and pests and diseases, reducing output by 90,000 metric tons, causing the recent rise in rice prices. The recent selling price of rice has not reached the level of an "astronomical price" or a "soaring price"; the basis of comparison should be "the production cost of rice."
According to the grain price query on the Agriculture and Food Agency website, the March white rice retail price for japonica (Penglai) was 42.05 (yuan/kg), referring to the average price of bulk rice of unspecified quality purchased by consumers.
An Agriculture and Food Agency official explained that in calculating rice costs, if based on a wet grain purchase price of 1,260 yuan per 100 Taiwan jin, this is equivalent to 21 yuan per kg of wet grain. Usually the moisture content of wet grain is about 28%; after conversion to dry grain, weight is lost, and the converted equivalent is 26.25 yuan per kg of dry grain. Then, in converting brown rice to polished white rice, weight is lost again, requiring multiplication by 0.85, which converts to about 38.6 yuan per kg of white rice. Because the processing produces ordinary broken rice, damaged grains, unripe grains, white chalky grains and so on, calculated at a screening rate of 20%, a further 20% price-difference loss of about 4.72 yuan must be added, equal to a direct cost of 43.3 yuan per kg of white rice.
As for packaging bags, at 1 yuan per kg, that makes 44 yuan (ordinary packaged rice, ordinary quality). Adding mechanical equipment depreciation and cost amortization, interest spread on funds for purchasing grain, drying costs, personnel costs, transportation costs, and at least a 25% channel commission and other costs, a market price of 65 yuan per kg of white rice (packaged rice, good quality or contract-purchased) can be considered a reasonable price.
An Agriculture and Food Agency official said, "The rice price should originally operate under a free-market economy, but for a long time it has not reflected the true cost. Grain merchants continuing to lose money or instead pressing down the purchase price of raw grain will keep deviating from the market mechanism. The current rise in rice prices should be seen as a moderate reflection of the true value of rice."