Rising Grain Prices Panic Developing World
Friday, April 4, 2008; Page D01
Governments around the world have taken radical measures in recent weeks to control their countries' supplies of rice. Egypt last week said it would ban all rice exports for six months. Cambodia has stopped all private-sector exports of rice, and India and Vietnam also have imposed restrictions.
The price of grains -- corn, wheat, and rice -- has been rising since 2005 under pressure from farmers who would rather plant crops for biofuels than for food, the lack of technological breakthroughs in crop yields, and drought and disease. The sharpest increase has been this year, with the price of Thai rice, a world benchmark, nearly doubling since January, to $760 per metric ton. Some analysts expect that price to reach $1,000 in the next three months.
Tang Min, a former chief economist for the Asian Development Bank, said the price increase is the inevitable consequence of supply and demand. "The world population is increasing, but the increase in the planting of rice has not been as fast," he said.
Despite efforts by governments to increase public-sector wages and introduce food subsidies, price increases and shortages have led to violent clashes along supply lines, in food distribution centers and at supermarkets.
"Rice shortages and unrest are not necessarily linked, until you think about the poor. Rice is of high importance in these people's daily lives," said Tang, deputy secretary general for the China Development Research Foundation, a Beijing-based research group.
Nowhere is that more true than in Asia, where a meal isn't a meal without rice.
Wang Qing, an economist for Morgan Stanley in Hong Kong, said U.S. laws encouraging the development of biofuels are the origin of the problem in Asia and elsewhere. This "directly led to the reduction of foodstuff planting," he said. "Without the oil price increasing substantially, the corn price will not increase. Without corn prices increasing quickly, the rice price will not rise."
But as food-growing countries move to increase production and curb exports, they are under pressure from rice-importing neighbors seeking their help. Bangladesh has announced that it will import 400,000 tons of rice and sell it below cost. The Philippines, where demonstrators have taken to the streets to criticize the government for not doing enough to control inflation, is appealing to other countries for emergency supplies.
Cambodian Finance Minister Keat Chhon last week called for people to be calm. He urged them "not to stock up on foods, which could make the situation even harder."
Some experts say that building reserves to protect against future shortages only makes the problem worse.