Rising prices and export bans among some producers indicate a crisis may be coming in rice consumption, Asia’s main food staple.
Despite the fact that supplies remain at about last year’s level, since January rice prices on the international market have jumped almost 50 percent, according to a report in the upcoming edition of East-Asia-Intel.
Long-term trends and short-term shocks have collided to produce the price spikes. Higher incomes across Asia are leading to increased consumption of both rice and meat with more grain being diverted for use as cattle feed. Production of biofuel — particularly the corn programs in several Western countries, including the U.S. — has put pressure on grain supply.
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Global rice stocks are at their lowest since 1976. Rice prices had been slow to follow wheat, corn and other agricultural products moving upward, but a rapid increase started at the beginning of the year. Since January, prices on the international market have risen on almost a daily basis, causing unprecedented market volatility.
“Many people who have been in this business for 30 to 40 years have never seen this kind of market situation in their lives,” said Wanlop Pichpongsa, deputy managing director of Capital Rice Company, one of Thailand’s leading rice exporters. “In the morning rice is at one price, and in the afternoon it’s another,” said Wanlop. “It’s like the stock market.”
Rice prices have been rising steadily on the world market since 2003, in tandem with oil, and began to shoot up last year as oil approached and then this year surpassed $100 per barrel. But this year’s rice price hike may also be fuelled by something else, which has some observers worried.
The U.S. Department of Agriculture forecasts global rice stocks for 2007-2008 at 72 million tons, the lowest since 1983-1984 and about half of the peak harvest of 2000-2001.
“I think there is a lot of speculation and a lot of hoarding, because with the dollar going down you don’t want to hold on to currency, you want to park this currency somewhere and where it is parked now is in commodities,” said Shamika Sirimanne, a development policy expert at the UN Economic and Social Commission for the Asia Pacific (UNESCAP). Around the world, particularly in Asia, governments are moving cautiously to trim exports and in some instances to increase stocks.
China, among several countries in the Asian region that subsidize rice, is facing an increasingly expensive subsidy proposition. It has had record-breaking increasing food costs since August, in large part a result of having to cull swine due to the highly infectious blue ear disease. Now there are likely to be regional shortages of rice. According to early government estimates the recent three-week snow storms caused $7.5 billion in damages, including destruction of winter crops leading to the government’s granting a $700 million relief package for farmers.

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Both Vietnam and Cambodia, major exporters, followed India’s lead in March by ordering an increase in stockpiles. Vietnam has been hit by a virus called tungro and infestations of the brown plant-hopper insect. Farmers are complaining that despite a 50 percent increase in price of rice in the last three months, prices have doubled for fertilizer, insecticides and labor. Furthermore, to curb rising food costs and inflation, Hanoi has cut rice exports by a million tons this year.