Impacts of water cycle changes on the rice market in Cambodia: stochastic supply and demand model analysis

Abstract

A supply and demand model for rice in Cambodia, which includes among other factors evapotranspiration as a water supply variable impacting regional yields and planted areas, is developed to aid in the design of agricultural policies and planning. Impacts are determined stochastically by drawing on water cycle distributions and evaluating the resulting variation in production and price bands for local rice markets. The results of the baseline analyses indicate that production of wet and dry season rice steadily increases and the consumption per capita slightly decreases due to the negative income elasticity. Results of a partial stochastic analyses show that the production of rice in regions where elevations are high and the land vulnerable to flooding are the most sensitive to increased fluctuations in water supply. The changes also affect the rice market through equilibrium price changes. The upper price band, which is the width between average and 90th percentile, is larger than the lower band, which is the width between average and tenth percentile, suggesting that the situation of low income consumers could grow worse under an unstable environment with relatively larger upward price spikes. The results imply that development of irrigation facilities and water management systems maybe required for Cambodian provinces which rely heavily on agriculture, particularly rice production, under increasing climatic variation.