Tweet
Small shocks bring big consequences
FAQ: The problems with rice
Felicity Lawrence
The Guardian, Wednesday May 28 2008 Article history
Why is there a problem now?
The price of rice has reached record highs in recent months, moving from $327 a tonne a year ago to $1,000 a tonne last week. Yet there is no serious shortage of rice - global production and consumption are roughly in balance. Supply has been affected by floods in Bangladesh which forced it to buy more on the global markets than normal, and the cyclone in Burma will probably force it to do the same, but the UN's food and agriculture organisation says rice producers generally have not been not hit by large-scale climate shocks and supply and demand is not the main cause.
Instead the cost of producing rice and transporting it has gone up as oil prices have risen, and this oil-driven inflation seems to be the underlying factor in the recent rice crisis.
Rice differs from other agricultural commodities such as corn, wheat and soya, in that very little is traded internationally. Just 7% of the global harvest, about 30m tonnes a year, goes on to the world market, but precisely because the market is so thin, small shocks can lead to great volatility.
Half the world's population, more than 3 billion people, depend on rice for their staple food, and it is one of the most politically sensitive of agricultural commodities.
Several governments, worried by the political fallout from domestic inflation - in fuel, utility prices, and rent, not just food - have tried to mitigate against the effects by imposing controls on rice exports. In October 2007 India imposed price controls and then a full ban on its rice exports in an effort to keep prices of food, and overall inflation, down at home.
Several other rice exporters followed, including Vietnam, Egypt, Pakistan and Cambodia. That led other countries which are big importers, such as the Philippines and Indonesia, to panic buy, driving up prices. Between January and April 2008, they surged by over 70%.
FAQ: The problems with rice
Felicity Lawrence
The Guardian, Wednesday May 28 2008 Article history
Why is there a problem now?
The price of rice has reached record highs in recent months, moving from $327 a tonne a year ago to $1,000 a tonne last week. Yet there is no serious shortage of rice - global production and consumption are roughly in balance. Supply has been affected by floods in Bangladesh which forced it to buy more on the global markets than normal, and the cyclone in Burma will probably force it to do the same, but the UN's food and agriculture organisation says rice producers generally have not been not hit by large-scale climate shocks and supply and demand is not the main cause.
Instead the cost of producing rice and transporting it has gone up as oil prices have risen, and this oil-driven inflation seems to be the underlying factor in the recent rice crisis.
Rice differs from other agricultural commodities such as corn, wheat and soya, in that very little is traded internationally. Just 7% of the global harvest, about 30m tonnes a year, goes on to the world market, but precisely because the market is so thin, small shocks can lead to great volatility.
Half the world's population, more than 3 billion people, depend on rice for their staple food, and it is one of the most politically sensitive of agricultural commodities.
Several governments, worried by the political fallout from domestic inflation - in fuel, utility prices, and rent, not just food - have tried to mitigate against the effects by imposing controls on rice exports. In October 2007 India imposed price controls and then a full ban on its rice exports in an effort to keep prices of food, and overall inflation, down at home.
Several other rice exporters followed, including Vietnam, Egypt, Pakistan and Cambodia. That led other countries which are big importers, such as the Philippines and Indonesia, to panic buy, driving up prices. Between January and April 2008, they surged by over 70%.
