Rice prices set to rise

Credit crunch will make it hard for farmers to secure cash to buy essential supplies
Today Online 10 Jan 09;

MANILA — Rice prices are likely to rise sharply for the second straight year in 2009 as the global economic slowdown hits farmers and consumers alike, the International Rice Research Institute warned yesterday.

The worldwide credit crunch will make it hard for farmers to secure cash to buy essentials such as seeds and fertiliser, the Philippines-based body said in the latest edition of its quarterly journal Rice Today.

At the same time, it added, the economic downturn may increase demand for rice in developing nations as falling income forces poor people to switch back to less expensive staples.

The price of rice — a staple food for half the world including nearly 700 million poor Asians — shot up to US$1,080 ($1,597) a tonne last April, triggering fears of social unrest. It slid to about US$575 six months later due to record production and the early effects of the economic slowdown.

However, the institute warned, “production uncertainty due to tight credit and declining rice prices, combined with strong demand growth” point to another rise in rice prices in the coming months. “Price volatility will remain high.”

Even if they had the cash, farmers burned by the sudden plunge in commodity prices “will likely play safe and reduce input for their 2009 crops.”

Due to high rice consumption levels in five of the last seven years, governments have had to dip into their reserves to make up the shortfall. Historic low levels of rice stocks contribute to the volatility, it added.

While rice prices have dropped from their 2008 peaks they are still high relative to 2007 levels, and are likely to remain too high for millions of poor people.

The institute said the only solution was to boost rice yield growth through greater investments in research, and developing infrastructure to let farmers put new scientific breakthroughs to work. afp