The run on rice

When I saw & heard on TV yesterday that the Costco & Sam’s club shops in USA are starting to restrict rice sales and that rice prices (max 20Lbs per customer) have gone upto $20 from $8 per bag, I started to take note. Was this really happening in the wealthy & stable USA? Look at the picture; it is from a Costco store in California (courtesy ABC, AP news). Then my younger son told me that Filipino expat workers were sending bags of rice from Canada to Manila. Blame stories like ‘Global rice shortage due to rice hoarding by India’ started appearing here & there…

Sample some headlines
Thai rice hits new record, feeding food fears
Riots in Africa & Haiti
Americans hoard food as industry seeks regulations
Costco CEO Blames Media for recent run on rice
Rice shortage in Philippines
Bush Orders $200M in Emergency Food Aid
UN: Rising food prices are silent tsunami

Some months back, a local Indian shop owner told us to buy the biggest bag of Atta if we could. When asked why, he said, wait and see, there is going to be a ban on exports from India soon and prices will go up and you will have difficulties getting your favorite atta and pulses (he did not mention rice at that time). We thought that was a clever ploy to get rid of his big bag stock. Looking back, this ban on flour took effect after 4 months and it also affected the rice exports from India. Indian papers stated that the government did this to stave off the increasing rice prices in India but that Basmati exports were not affected.

Meanwhile Filipinos, Latinos and Indians started to rapidly buy the rice bags off the shelves in the US market. Yesterday, even mainstream US TV, after the Pennsylvania presidential primaries of Tuesday had been done with, was interviewing Indian shop owners!! And I remembered some days in my childhood, days when wheat entered our cuisine. After the late 50’s early 60’s famine, rice output dropped and wheat was gifted by the Americans to India (see my blog on Congress grass). A ration card system was soon introduced and even wealthy families needed one to obtain the delivery of the ration rice. Some of it was initially smelly and of poor quality, and raw rice was hardly available in ration shops. (The ration card system is just being introduced in Manila now and they are delivering subsidized rice on the streets in Manila). Later on, the ration card became an ID card and all kinds of stuff such as kerosene, Kora cotton textiles started getting delivered in those shops .

So why do we have these food shortages today? Many reasons are attributed

1. Massive outflow of money from stocks into commodity trading and commodity futures, thereby raising prices. Speculative buying by investors gambling on further price rises has further pushed up prices
2. Hoarding and buyers panic – opportunistic pricing by sellers
3. Shrinking wheat crops - Production of corn & maize instead of wheat due to demand for bio fuels. Senior Bush Administration officials reiterated their defense of corn-based ethanol fuel on Tuesday, saying it was just one factor in rising food prices but that high energy costs (due to oil prices)were the main culprit
4. Increase in domestic stocks by certain food producing countries
5. High energy rates, bad weather and an increase in demand are also factors
6. Experts blame climate change as heat waves caused a slump in harvests last year in Eastern Europe, Canada, Morocco and Australia, all big wheat producers.
7. The collapse of Australia’s rice production is one of several factors contributing to a doubling of rice prices in the last three months

Brazil became the latest country on Wednesday to suspend rice exports, following in the footsteps of India and its close rival for the mantle of world number-two supplier, Vietnam. China, India, Egypt, Vietnam and Cambodia have either imposed minimum export prices, export taxes or export quotas and, as is the case in India & Vietnam, bans. As a result, demand has surged in countries that rely largely on rice imports, such as Bangladesh, SE Asia and Iran.
Look at the US price surges over the past year - Rice 122%, Wheat 95%, Soybeans 83%, Crude oil 82%, Corn 66%, Gasoline 41%, Gold 37%, Sugar 30%, Coffee 24%. Rice futures on the Chicago Board of Trade climbed 2.5 percent on Wednesday to an all-time high of $24.85 per hundredweight

In Thailand some farmers have been harvesting rice under armed protection. (Jasmine rice rose from $300 until late 2007 to today’s $1000 a tonne). The country is the world's top rice exporter and Thai farmers are taking no chances. In Pakistan, military escorts are following all trucks carrying grain, and are guarding grain silos. Even in wealthy Korea, consumers went into a near panic in early March when the cost of ramen, an instant noodle made from wheat that is a staple of the Korean diet, spiked in price. Housewives emptied grocery shelves for days in Seoul to snap up supplies before the increase went into effect. Myrna Lacdao used to eat two meals a day in Philippines. Now she eats one and gives the rest to her two grandchildren.

Nathan Childs an analyst provides an interesting insight in the LA times There is no dearth of rice in the United States. The Department of Agriculture projects U.S. rice supplies this year will be 8.3 million tons, nearly unchanged for the last seven years. Because Americans consume just 10% to 15% of what people in Asia's big rice-eating nations eat, there's plenty for domestic use, said Nathan Childs, a USDA market analyst. Rice consumption in the U.S. is so low that as much as half of the domestic crop is exported. Most rice is eaten within 100 miles of where it is grown. Just 8% of world production actually trades internationally, Childs said. So these new export limits and taxes have had an outsize effect on prices, he said

Being from a rice farming family (mother’s side), I still remember my brothers complaints that rice prices were too low compared to production costs, that it was becoming difficult to maintain the farmlands and his plans to shift to other crops like sugarcane and pulses. But, I thought, what would he say now seeing the price of rice? Strange indeed are the ways of the world.
Even in wealthy US, farmers have always been treated with kid gloves and provided massive subsidies. In India, that is hardly done. 17,107 Indian farmers committed suicide in 2003 and the trend is continuing. As the country is fast moving into a consumerist society, farmers will lose the will to work more and earn less, moving to more lucrative avenues. As NY times puts it, India’s economy may be soaring, but agriculture remains its Achilles’ heel, the source of livelihood for hundreds of millions of people but a fraction of the nation’s total economy and a symbol of its abiding difficulties. In what some see as an ominous trend, food production, once India’s great pride, has failed to keep pace with the nation’s population growth in the last decade.

Hopefully the politicians and bureaucrats are working on this. Meanwhile I guess what we could do is to reduce spending and waste & practice austerity. The press & TV will continue to make hay, but raise awareness and bring in realization, the hoarders will hoard, profiteers will profit, the panic stricken will run helter-skelter and countries like India will get their share of blame…

Hopefully the world will ride out this one.


Jennifer said…
It's a sad commentary on a global scale as farmer's the world over feel no respect- not only leading to suicide, but a suicide of a profession. Where are all the farmers going? How will the world continue to grow food for all when farmers are leaving for more lucrative ventures?
Indrani said…
This is quite scary.

In India the Agriculture sector is hardly given any importance. If the produce is more they are left to rot in roads and if produce is less prices soar. Off late prices of food products have soared here too.
Sreejith Kumar said…
Oh that's too mucH!!!!!
Very topical and informative. I wasn’t aware of the global rice scenario till reading this. And imagine - Kerala lost a large quantity because the rice crop in Kuttanad couldn’t be harvested in time.

Your brother’s complaints still hold good at least in Kerala. The farmer doesn’t get the benefit of the high prices.

According to media reports India seems to have sufficient stock of grains for the time being. The problem is bad planning and distribution for which the States too are responsible.

Kerala unfortunately didn’t ask for sufficient rice allocation from the Centre within the prescribed time.
narendra shenoy said…
Farmers not getting fair prices is all set to change. Technology is one of the enablers. Farmers have excellent information regarding produce prices, especially for non-perishables like rice and wheat.

In real terms, prices of food grains has depreciated. It is only now that there is a sharp correction. I think people should pay. Poor people will find it tough, that is true, but the government needs to do something for them, not throttle down farmer's prices.

Community kitchens might be a good idea

Thanks for a well written piece on a sensitive issue
harimohan said…
a lot of info indeed a real eye opener .
In Kerala harvesting was strangled by the communists ,labourer cost and arrogance was too much for families to continue tilling thier fields ,many were filled and high rises rose specially around cities ,again the commies came and started destroying plantations which were more lucrative vettiniruthal they called the dance of destruction ,
now when I see an autorickshaw in Kochi with a name called Rice Problem I realise that is not only his problem but an international one !
Nanditha Prabhu said…
only yesterday were we discussing abt this issue after visiting costco.
your article was very informative .
is that snap on the side of your home library?
Pradeep said…
Amazing story this was.... but now the latest is US blaming India for this... saying the shortage is bec India's consumptions has grown.
Maddy said…
Thanks Jennifer - valid comment & question. It is such a situation that will be used by politicians to promote radical ideas like GM foods...

Indrani, Abe, Narendra, Sreejith, hari and pradeep - It is all due to a combination of greed, bad politics & society's upgrading of urabanism over ruralism...How true gandhiji was when he said the real india still lives in its villages!!

Nanditha - yup it covers 3/4th of my collection, rest is still in boxes...