Worldwide shortage of rice sends prices soaring

Nirmal Ghosh, Straits Times 18 Feb 08;

BANGKOK - AS THE price of rice climbs across South Asia, farmers and millers in Thailand are sitting on stocks and waiting for it to rise even further, said a top rice exporter in Bangkok.

The exporter, who requested anonymity, told The Straits Times: 'In my 25 years of trading, I have never seen such a bad position.'

There is a rice shortage in Bangladesh and China too, among other countries, while there is a wheat shortage in Afghanistan.

In local markets in Pakistan, the price of rice has gone up over the past month by more than 60 per cent year on year.

India recently contributed to soaring world prices when it imposed a ban on rice exports - relaxed only partially to allow some supplies to Madagascar, Mauritius, the Comoros Islands and cyclone-hit Bangladesh.

China has banned rice exports to ensure enough is available for domestic demand.

From Kansas to Kabul, high rice and wheat prices are worrying officials and economists, and beginning to hit consumers - especially tens of millions of poor people - harder than many can remember.

In Singapore, while rice importers and supermarkets have no problems getting the staple grain, prices have escalated.

In the past three months, prices have risen sharply by 30 per cent to 40 per cent, said a spokesman for rice importer Tong Seng Produce.

FairPrice, which has diversified its rice imports - with supplies coming from Australia, Thailand, Vietnam and India - has been able to secure its regular supply.

While prices of imported rice have spiked, its spokesman said the supermarket chain would try to hold prices steady for as long as it could.

Singapore imports rice from more than 20 countries, including Thailand, Vietnam, Myanmar, China, Pakistan, the United States, Egypt and Australia.

The causes of the shortages and high prices are diverse, and vary from country to country.

They include natural disasters or adverse weather; high fuel prices, which add to transport costs; hoarding and smuggling of rice and wheat to take advantage of higher prices across national borders; and, in Pakistan, a shortage of electricity that is reportedly hampering mills from functioning at full capacity.

Only around 7 per cent of the world's rice supply is traded internationally, but it is a critical amount for any country facing a shortage because rice is also a political commodity.

Worldwide, economists are worried that the diversion of agricultural land and certain crops to biofuel production is cutting into grain and cereal production for human consumption.

The prices of rice and wheat are linked. India's ban was not as much in response to a shortage of rice as to worries over the coming wheat harvest.

Indian officials are waiting for the results of the March-April wh-

eat harvest as well as the rice harvest from south India to gain a fuller picture of their stocks.

In the United States, wheat futures in Kansas City, Chicago and Minneapolis have surged to record highs on forecasts of tighter supplies and continued strong demand at home and abroad.

A recent food price survey by the Farm Bureau in the American state of Missouri found that in the fourth quarter of last year, the retail price of a 20 ounce loaf of bread had already risen 30 US cents from the previous quarter to US$2 (S$2.80).

In South-east Asia, rice traders are waiting for the results of the rice harvest in another major producing country in the region - Vietnam.

In the meantime, Thailand is one of the few countries where rice is still available in large quantities. But it is not helping.

This year, rice prices are up 50 per cent over last year - their highest level in 20 years, by some estimates.

But Thailand's rice exporters - numbering between 150 and 200, but with the top 10 controlling up to 70 per cent of the export trade - are finding rice hard to come by because of stockpiling by farmers and millers.

They have also been hit by the rising baht.

'Exporters are finding it tough, and so are consumers of rice,' said the exporter who spoke to The Straits Times.

'Even non-rice traders have gotten into hoarding rice here, so exporters have not got it. The government's procurement price for paddy is 6,700 baht (S$301) per ton, but the real price is up to close to 9,000 baht per ton.'

While the Thai government has been releasing rice from its stocks, the volume has not been enough to alleviate the situation, he said.