Rice Crisis
The price of rice has been increasing since early 2003, and has now risen by 70% in the past year. While rice isn’t the only commodity rising in price, wheat doubled last year, corn and soya are trading far above their 1990s averages, rice has the biggest effect because it is a staple of the diets of some of the worlds poorest regions. Small fluctuations in price of this commodity quickly raise havoc as many cannot afford to feed themselves or their families.
This year began with a rocky start from Thailand’s rice exports. Thailand is well known for exporting rice and many rice traders are very experienced. Many believed that the price of rice would continue to rise and that this year would be a boon to many rice exports. However most of the rice exporters didn’t realize how fast the price would rise. Poor weather and supply concerns had restricted rice exports from Vietnam and India, the major rival exporters. Furthermore, China, Egypt, and Australia had also decreased the amount of rice to be exported. Thailand was flooded with buyers and the sellers began dealing. Margins have always been tight in rice trading but when the profits on deals went from $1 dollar a ton to $5 dollars a ton Thai exports were ecstatic. However, these froward-order deals required the Thai exporters to buy the rice at local markets. What they found was a seller’s market they had never thought possible both local and export prices for rice were rising despite delivery windows of 3-4 months many exports found their profit margins disappearing in a few hours. Forced to honor their commitments, many exporters, were forced to buy rice at $200 per ton more than they had sold the rice for previously. In the months between November to February an estimated 35 exporters some of the most experienced traders lost an estimated $128 million.
By late February supplies of rice were gone. International pressure fears that the rice suppliers were hoarding to speculate on even higher prices forced the Thai government to launch an investigation in to the matter. No hoarding was found and the government’s supply of rice was 12,000 tonnes less than expected — as the rice had disappeared in the custody of millers and storage agents for the government. While international exporters suffered the worst loss seen in decades farmers and millers saw profits unlike any they had encountered before. Many smaller rice producers have withdrawn from the market while some still accept orders but only one month in advance. Many believe that as oil prices rise farmers are switching to fuel crops in search for profits thus decreasing supply. With demand already outstripping supply at every level in the marketplace many countries are considering intervening to ensure that domestic consumers can still afford this now precious commodity.
In the recent weeks price increases of rice have been accelerating. There are a few factors contributing to this. Firstly, population growth — the amount of people in the world has expanded exponentially from 2.5 Billion in 1950 to 4.1 billion in 1975, 6.1 billion in 2000 and it is estimated that this growth will continue with 9.2 billion people estimated by the year 2050.
The major countries producing rice such as India, China, and Vietnam have restricted exports as they try to protect their stocks. Importing countries such as Bangladesh, the Philippines, and Afghanistan have been hit hard. An excellent example of the trouble caused by this price increase is Haiti. The country continues to undergo rioting and violence associated with the inability of the poor to deal with the rising prices of food.
The head of the world bank Mr. Robert Zoellick called for a “new deal” to help ward off a food crisis, and boost agricultural production.
Rise Prices eased after Japan and Pakistan stepped up supply for export of the prices. However, the cyclone in myanmar and the floods in China might be responsible for an flare up in prices.