Impact of changes in ocean freight rates on United States rice exports
Alarcon, Jorge Alfonso
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The direction and magnitude of the future world rice market is of vital consideration for the rice industries of both exporting and importing countries. Many studies have analyzed the international rice trade; however, there has been no published research that attempted to examine the effects of ocean freight rates on international rice trade. The major objective of this study was to analyze the effects of ocean freight rates on the flows, supplies, demands, and prices of world rice shipments. A reactive programming model, within a spatial equilibrium analysis framework, was developed to obtain equilibrium level estimates of the variables mentioned above, to investigate the competitive position of major rice exporting countries, and to evaluate the effects of ocean freight rates in four different scenarios. The 1990 calendar year was used as the base year for the analysis. Optimum shipping patterns of rice exports from the U.S. to world markets in 1990 was obtained to compare with models of the four different mentioned scenarios. The results show that the competitive position of the U.S. rice industry would be reduced from its actual level in the world rice market under some trade conditions. That is, the U.S. rice industry would lose its export volumes under an optimum minimum cost trade market structure, while the position of U.S. competitors, such as China, Vietnam, and Thailand, would improve significantly. Also, the U.S. cargo preference policies did little to affect the world rice trade market structure. Likewise, the results indicated that even when ocean freight rates have an important influence on the international rice trade, its effect is significantly different in each exporting country. China would be the most sensitive country to changes in ocean freight rates, not only in terms of its level of exports, but also in terms of the configuration of its rice trade pattern. Vietnam and Thailand rice exports and trade patterns also would respond significantly to changes in ocean freight rates, while the response of the U.S., in the same terms, could be considered relatively minor. Changes in ocean freight rates are not recommended policies to enhance the competitive position of the U.S. rice industry. Other issues of policy, such as support to rice production and exports, and price policy, could be considered as more influential mechanisms to help the U.S. rice industry.