Sunday, April 20, 2008, 10:44 AM
- Risen to record-high levels across the world (risen by 30 per cent within the past 3 months)
: Premium Thai rice has spiraled in price from about 9600 baht a tonne last December to 10,500 baht a tonne today
: In January in the Philippines, a standard sack of rice was selling for 720 pesos. In March, it has risen to 1,100 pesos
Reasons for rise in rice prices
Tight global supply of rice
- Wastage and loss of rice lands have created a recurrent shortfall of around 10 to 15 per cent
- Natural disaster and adverse weather
i. Erratic weather (perhaps due to climate change in grain-producing countries)
ii. Severe 10-year drought in major wheat exporter Australia
iii. Harvests have been affected by drought and heat waves in South Asia, Europe, China, Sudan, Mozambique and Uruguay
- More lands are being used for biofuel production instead of grain
i. Land used to grow biofuel feedstock is land not available to grow food
- Hoarding (storing of food, in this case rice)
- Curbing of exports by major suppliers
i. Vietnam, Thailand, India and Chinas have imposed restrictions to limit grain exports and keep more of their food at home and guarantee domestic supply
- Poor governmental policies
i. Becoming complacent (precautionary inventories were allowed to shrink as they believe that countries suffering crop failures could always import the food they needed)
Rising demand
- Rising affluence in India and China (growing number of people in emerging economies who are, for the first time, rich enough to start eating like Westerners)
- People are buying more not because they fear supplies dwindling, but because they fear prices shooting up further
Rising production costs
Higher oil (persistently above US$100 per barrel) and fertilizer costs
i. Higher transportation costs
Policy neglect and decline of the agricultural sector
Policies taken to solve rice shortage problem
- Philippine government signed a deal with Vietnam to import more rice to boost the country’s reserves
- National Food Authority (NFA – Philippine) will sell subsidized rice for Filipinos with low incomes
- Curbed or halted exports to safeguard domestic supplies
:Suspended their rice exports
- Cambodia and China
- Egypt (world’s highest consumer of bread) has banned rice exports for six months on the back of worries over wheat
- Ukraine to Argentina have been limiting exports in an attempt to protect domestic consumers, leading to angry protest from farmers
- India has stopped exporting its non-basmati varieties
- Indonesia, Mongolia, Sri Lanka and South Korea have already dropped or reduced import tariffs on the grain
- Singapore
: NTUC giving out discount vouchers which gives 5 per cent discount to offset the 5 per cent inflation this year
: MCYS raise financial aid given to those on public assistance
Some interesting points of discussion we can note will be:
Should there be governmental intervention?
Against:
- Market will self-correct
- Becomes more expensive, farmers will find it more worthwhile to grow it (price will then come down)
- By talking too much about the rice situation, political leaders risk panicking the people more (push up demand for rice even further – leads to price hike)
For:
- Rice is price inelastic to most Singaporeans, especially the lower income groups (as there are no cheaper substitutes)
- Government need to intervene to ensure that these group of people will still be able to buy rice
- The situation today is very severe as the shortages are happening worldwide Yuppyupp. This is the current situation for the rice crisis. Actually, today we are facing many other food crisis as well besides rice. Many articles on these crisis can be found on the newspaper, yup so do keep your eyes open for them.
Ok shall end here. Hope you guys have a great sunday :)
shimin
