London, 18 April 2011

The impact of crude oil prices has far reaching impacts on the direct and indirect costs involved in rice production. Researchers have mapped crude oil, rice and soybean oil prices between 1970 and 2008 and demonstrate the implications of world crude oil prices on the agriculture sector, in particular on rice production. The paper, in the Journal of Social Sciences and Humanities (JSSH), also suggests that soybean oil producers do not face the same problem and should not worry about the fluctuation of crude oil prices.

The study used the data of the world crude oil prices and the prices of rice in Malaysia and soybean oil in the Rotterdam market from 1970-2008. An Autoregressive Distribution Lag method was used, which allowed the team to investigate both short and long term dynamics. Their findings show that there is a long-term relationship between the world crude oil price and the agriculture sector, with high production costs cutting into profit margins. The authors warn that these: 'situations will become worse if they do not receive any subsidies or incentives from the government'.

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