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.
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.