In March 2022, we interviewed more than 540 active rice millers to assess business disruptions and price changes at the midstream of Myanmar’s most important agricultural value chain.

Key findings:

Electricity and fuel disruptions were cited as the largest disruption for more than 80% of millers in March 2022, overtaking banking disruptions which had been the largest challenge in each survey round since early 2021.

Transport and fuel cost increases are also significant difficulties for modern mills. Diesel prices have more than doubled from a year ago.

Paddy and rice prices were higher in March 2022 than one year prior. For Emata varieties, paddy prices increased by 14 percent and milled rice prices increased by 8 percent. However, milling margins are stable, suggesting that millers are not contributing to the escalating consumer rice prices.

Total monsoon harvest season throughput declined by 15 percent on average compared to a year ago. The leading factor is likely households withholding more rice and marketing smaller volumes, though reduced milling time from electricity cuts and diesel shortages also contribute.

Lower throughput and constant margins imply lower overall profitability reflected in lower average operating capital. Lower profits and heightened uncertainty over the last two years have also contributed to a sharp decline in machinery investments.

Looking forward:

Increasing fuel and transport costs increase distribution margins and raise consumer prices. Electricity shortages or unpredictable shutoffs for modern mills could put further upward pressure on prices by restricting the marketed supply of rice.

There is a high degree of uncertainty about rice exports from the recent foreign exchange policy changes including a fixed kyat conversion rate. Access to export markets can help stabilize prices in an otherwise turbulent economy. Further, with declining miller profits, byproduct markets become even more important for financial viability and a large volume of broken rice is exported. Therefore, potential disruptions to rice exports could have adverse effects on the rice value chain.

The low investment in machinery in recent years not only suggests stalled growth in the rice milling sector but also some depreciation of equipment without replacement.