Global food crisis looms as Asia's rice bowl empties and world price soars

THE crisis over rice showed no signs of easing yesterday as the price of the world's benchmark jumped 10 per cent in just one week, fanning fears that millions across Asia will struggle to afford their staple food.

In a clear sign of the strain on output after major exporters began to curb exports earlier this year, a tender from the Philippines, the world's top importer, attracted offers to sell only about two-thirds of the half a million tonnes it sought.

In Bangkok, Thai 100 per cent B grade white rice, considered the world's benchmark, hit $950 (£482) per tonne, three times its price at the start of 2007.

"There's been a popular misconception that the world can produce as much food as it likes. Well, it obviously can't. And Asia can't feed itself at the moment," Gerry Lawson, the chairman of Sunrice, a major Australian rice producer, said.

Increased food demand from rapidly developing countries, such as China and India, the use of biofuels, high oil prices, global stocks at 25-year lows and market speculation are all blamed for pushing prices of staples such as rice to record highs around the globe.

The unprecedented surge, which some analysts said is going to continue, posed a growing threat to regional governments worried about the prospect of hoarding and social unrest.

Governments in top producer countries, such as Thailand and the No2 exporter, Vietnam, are urging farmers to grow extra crops, although it will be several months before the additional supply hits the market.

Meanwhile, demand from other big importers, such as Iran, which is expected to try to buy up to one million tonnes of Thai rice this year, will keep the upward pressure on prices.

The Philippines is the hardest hit of the Asian nations in the current crisis – although secretive North Korea is likely to be in a worse position.

As a measure of the seriousness of the problem, Manila has temporarily halted conversion of agricultural land for property development, hoping to ring-fence paddy fields to meet the food needs of the country's 88 million people.

Soldiers guard sales of subsidised rice by the state National Food Authority, and the government has filed charges against 13 people suspected of hoarding.

The global turmoil is such that the US secretary of state, Condoleezza Rice, yesterday said the United States hopes to announce fresh steps to alleviate food shortages around the globe. "The rapid rise in global food prices is an urgent concern," she said.

Soaring rice prices have come as fears about tight world supplies led governments to hoard and ignited protests in places like Haiti, where five died in food riots last week.

"You've been drawing down the world stocks since 2000. You're down to the bottom of the barrel," said Ed Taylor, an analyst with Firstgrain.com.

The US government projects world stocks of rice to be 77 million tonnes by 1 August, the start of the new marketing year. That is up slightly on a year ago, based on projections for a five million tonne rise in world production. But world stocks will still be 48 per cent below 2000.

This season's world production could also still be hurt by the weather, leaving countries in need of imports at a time when many countries are already holding back on exports. India and Vietnam have banned exports.

India shut off the supply valve in October, when it banned exports of non-basmati rice to its Asian neighbours. Thailand stepped in to fill the gap, but soon found that it, too, was running short of rice.

In times of grain shortages, the world typically turns to the US, but US rice stocks have been cut in half the past two years. Rice acreage is being diverted to soaring corn, wheat and soybeans.

In 2007, the US produced only about six million tonnes of rice, out of total world production of 425 million tonnes.

"It's just a drop in the bucket," Mr Taylor said. "We don't have anywhere near enough quantity to bale anybody out."

Bob Papanos, the head of The Rice Trader, a weekly rice marketing publication, underscored the point. "We've had declining stocks, declining stocks-to-use ratios for the last 15 years," he said. "It all came together and slapped the world in the face."

The United Nations' World Food Programme said on Tuesday that the price it pays for rice to supply food donations jumped to $780 a tonne from about $460 a tonne at the beginning of March – just after it made an emergency appeal for an extra $500 million.

Rice could be even more volatile, since governments in many nations – including across Asia's "rice bowl" – consider rice a national security priority.

What makes rice supply/demand special is that almost all of the crop is consumed where it is grown.

Only 6 per cent of world rice is exported, compared with 17 per cent for wheat, the other main food grain.

VIETNAM

VIETNAM is among the better placed Asian countries – it is at least able to supply its own domestic needs.

But the world's third-largest exporter of rice has already imposed a 22 per cent cut in the amount of the crop it is willing to put on world markets – thus making life more difficult for its traditional customers, such as the Philippines.

Farmers in Vietnam say they have planted a special variety of rice for their summer crop, hoping that 7.8 million tons will hit the international market in mid-June, a month earlier than normal.

This rush to feed the market is not particularly a humanitarian one – with prices as high as they are, a Vietnamese farmer can make a good profit, enough to send a child to university or improve their agricultural equipment.

PHILIPPINES

THE Philippines is the world's biggest importer of rice and has been most exposed to a leap in international prices.

"I do not see any food riots in the Philippines," the defence secretary, Gilberto Teodoro, told reporters this week. "We don't see any immediate threats to national security, whether caused by this rice crisis or otherwise."

The president, Gloria Macapagal Arroyo, said an action plan to prevent rice shortages includes securing rice imports, proper distribution and cracking down on hoarders and price manipulators. The government has temporarily halted the conversion of agricultural lands for development, amid concerns it needs to ring-fence its paddy fields to meet a growing demand for rice.

Unmilled rice production in the Philippines is expected to reach 17 million tonnes this year, from 16.24 million tonnes in 2007, but the increase in output is not enough to keep pace with rapid population growth, one of the highest in the region.

INDONESIA

INDONESIA, the world's most populous Muslim country, has said it expects to be able to feed its more than 230 million people this year. Yet it is not unaffected by the rise in rice prices – inflation, related to the global price surge is hitting all manner of consumer products.

This week Indonesia became the latest country to impose controls on rice exports.

BANGLADESH

BANGLADESH is one of Asia's most overpopulated countries and one of the the poorest. It is particularly vulnerable to rises in the price of its staple, rice.

Hundreds of poor families are now surviving on one meal a day, and spending 70-80 per cent of their budget on food.

More than half a million Bangladeshi troops were yesterday ordered to eat potatoes in an attempt to ease the impact of surging prices


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