Mar 28, 2008

Crunching rice supply in East Asia

The FT has a nice story about rice supply, rising prices brought about by declining production, and its implications on security and social stability in Asia, particularly East Asia. Rising prices have already forced major rice exporters like Vietnam, Australia, and Egypt to curtail exports. Meanwhile, India has banned temporarily banned exports as well to satisfy domestic demand. This is going to put further upward pressure on rice price in the internatinal market. This is going to hit the South Asians (and to some extent East Asia and the Pacific) the most because rice is a major component of daily lunch and dinner (rice is consumed almost 365 days a year in South Asia). More on food prices here, and here (UN Secretary General writes about food crisis), here (People eating mud coookies in Haiti). For those interested in more economic interpretation of the rising food prices check this one out by Nobel laureate Gary Becker and Richard Ponser.
Some experts aruge that the Filipino rice shortage problem is exacerbated by the government and some special interest groups. It is said that the government is trying to siphon off a huge amount of money while importing rice from foreign countries. It is alleged that the Filipino government and special interest groups are trying to dissuade farmers not to grow rice, which would give them an exclusive control over rice sourcing and distribution in the whole country.

...Rice prices jumped 30 per cent to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5bn people.

...The increase came after Egypt, a leading exporter, imposed a formal ban on selling rice abroad to keep local prices down, and the Philippines announced plans for a major purchase of the grain in the international market to boost supplies. Global rice stocks are at their lowest since 1976.

...The Philippines, the world’s largest buyer of the grain, said on Thursday it wanted to purchase 500,000 tonnes after it failed to buy a similar amount earlier this month. It is struggling to import 1.8m-2.1m tonnes to cover a production shortfall and on Thursday confirmed it would tap emergency stocks maintained by Vietnam and Thailand.

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