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Source: http://www.ctv.ca/servlet/ArticleNe...YE_rice_supply_090103/20090103?hub=TopStories
Rice crisis to persist as stock rises, prices fall
Updated Sat. Jan. 3 2009 7:10 AM ET
Stefania Moretti, CTV.ca News
Next year may not bring much relief to the world's rice-dependant populations who suffered through one of the worst food shortages in recent memory, rice trade experts believe.
Overpriced inventories, protectionist trade barriers, the credit crunch and a warming planet are likely to continue standing in the way of getting the food staple to the more than 3 billion people who rely on it for basic nutrition.
Kevin Fitzsimons, a dedicated philanthropist, knows all too well how difficult getting rice to those who depend on it can be.
Fitzsimons has been working for the past six months trying to secure 60,000 kg of non-basmati rice for a group of more than 1,300 Tibetan refugee monks living in India -- but to no avail. He's been working with the Montreal-based Sera Mey Fund.
"In a perfect world, a supplier would donate the rice, or at least some it," Fitzsimons told ctv.ca in a telephone interview from Toronto.
"But I can't get my hands on it even when I offer to pay for it," the Toronto-based interior designer said.
Fitzsimons' frustrations come despite growing global rice stockpiles and falling prices heading into 2009.
As contradictory as it may seem, The United Nations Food and Agriculture Organization actually projects the world's rice inventory will rise to its highest levels since 2004 next year, thanks to a global push to plant more rice paddy.
As a result of growing supply, rice prices have been steadily falling since peaking last May at the height of the rice shortage.
But even with falling prices, the cost of rice today remains about double what it was in 2003 for almost every variety in nearly every rice-exporting country, FAO data shows.
The rice 'hangover' effect
Despite some positive trends, the 2008 shortage will continue to spell disaster for rice-importing countries, said a trade expert with Jackson Son and Company London Limited, an independent rice trading firm that's been around since 1860. Jackson and Co. provides the FAO with up-to-date rice price indexes.
Ben Savage, the managing director for rice at Jackson and Co., said numerous "volatilities" will continue to "skew" the market in 2009.
A "hangover" still lingers over major rice markets mainly as a result of government interventions to subdue last spring's rice crisis, Savage told ctv.ca in a telephone interview from London.
The secretary of the FAO international rice commission, Nguu Nguyen, agrees 2009 will be a "very difficult" year for major importing countries. The Philippines, Indonesia and Nigeria will be in need, Nguyen told ctv.ca in a telephone interview from Rome.
The haunting shortage
Last spring, evidence of the rice shortage could be seen in local markets from Manhattan to Manila, forcing many families -- and in the worst cases entire villages -- to go without the staple.
The crisis peaked in May 2008 when prices soared to levels three times higher than prices at the beginning of the same year. The most basic Thai 100 per cent white B-grade rice was selling for US$385 per tonne in January 2008, before sky-rocketing to US$963 by May, FAO data shows. Currently, the price hovers around the US$540 mark, Savage said.
A perfect storm of factors all but wiped out crops in the major rice producing countries, causing the crisis.
* Drought in Australia, floods in the Philippines and unfavourable growing conditions in other rice-producing countries led to weak first-round paddy harvests.
* Soaring oil prices increased the cost of much-needed fertilizers and basic transportation costs.
* High oil prices increased incentives for farmers to abandon traditional crops in favour of other commodities used in the production of biofuels, such as corn.
* A weak U.S. dollar, the world's rice buying currency, made it difficult for rice-importing countries to purchase the grain.
* Booming populations in countries such as India increased global demand for rice significantly.
* A growing upper class in countries such as China inflated the cost of available varieties.
"Those volatilities don't go away overnight," Savage said.
Looking forward
The single biggest factor affecting world rice stocks in 2009 will be climate, Nguyen said, citing drought as the biggest rice-killer.
The second most important variable in the price of rice will be oil, he said. When oil costs are high, fertilizer and transportation costs increase which directly hurts farmers.
The global economic downturn isn't helping either, the FAO recently suggested.
"Although less expensive rice on world markets should have boosted import demand in 2009, the uncertainty arising from the financial crisis has marred expectations for trade next year," the agency projected on its rice commodities website.
And although costs are coming down, the price of rice hasn't fallen in step with the recent steep declines seen in the cost of wheat, for instance.
The "aftermath" of the May 2008 price spikes left export bans in its wake, Savage said. Non-basmati rice varieties are still barred from leaving countries such as India and Egypt.
Current thinking in India suggests the government is unlikely to lift the ban before the federal election next spring, if it's lifted at all, Savage said. "Nobody really knows."
Making matters worse, expensive inventories are creating a backlog and overpriced rice is filling warehouses in places such as India, Savage said.
The pricey stock lingers in storage because export bans keep it from getting to those who need it in other countries, and many locals simply can't afford it.
So, even with secure stockpiles, the FAO expects the volume of rice trade to contract in 2009.
But there is a glimmer of hope in the fallout from the international rice crisis, Savage said. Struggling paddy farmers are earning fairer wages. Traditionally, rice farmers have been paid too little for their crop, Savage said.
"So in some ways I'm quite pleased to see the rice prices a little higher," he said.
Savage expects current volatile market conditions to persist in the coming months, although not necessarily to the extent seen in 2008.
"There will be nervousness though," he said. "And nervousness creates volatility.
Rice crisis to persist as stock rises, prices fall
Updated Sat. Jan. 3 2009 7:10 AM ET
Stefania Moretti, CTV.ca News
Next year may not bring much relief to the world's rice-dependant populations who suffered through one of the worst food shortages in recent memory, rice trade experts believe.
Overpriced inventories, protectionist trade barriers, the credit crunch and a warming planet are likely to continue standing in the way of getting the food staple to the more than 3 billion people who rely on it for basic nutrition.
Kevin Fitzsimons, a dedicated philanthropist, knows all too well how difficult getting rice to those who depend on it can be.
Fitzsimons has been working for the past six months trying to secure 60,000 kg of non-basmati rice for a group of more than 1,300 Tibetan refugee monks living in India -- but to no avail. He's been working with the Montreal-based Sera Mey Fund.
"In a perfect world, a supplier would donate the rice, or at least some it," Fitzsimons told ctv.ca in a telephone interview from Toronto.
"But I can't get my hands on it even when I offer to pay for it," the Toronto-based interior designer said.
Fitzsimons' frustrations come despite growing global rice stockpiles and falling prices heading into 2009.
As contradictory as it may seem, The United Nations Food and Agriculture Organization actually projects the world's rice inventory will rise to its highest levels since 2004 next year, thanks to a global push to plant more rice paddy.
As a result of growing supply, rice prices have been steadily falling since peaking last May at the height of the rice shortage.
But even with falling prices, the cost of rice today remains about double what it was in 2003 for almost every variety in nearly every rice-exporting country, FAO data shows.
The rice 'hangover' effect
Despite some positive trends, the 2008 shortage will continue to spell disaster for rice-importing countries, said a trade expert with Jackson Son and Company London Limited, an independent rice trading firm that's been around since 1860. Jackson and Co. provides the FAO with up-to-date rice price indexes.
Ben Savage, the managing director for rice at Jackson and Co., said numerous "volatilities" will continue to "skew" the market in 2009.
A "hangover" still lingers over major rice markets mainly as a result of government interventions to subdue last spring's rice crisis, Savage told ctv.ca in a telephone interview from London.
The secretary of the FAO international rice commission, Nguu Nguyen, agrees 2009 will be a "very difficult" year for major importing countries. The Philippines, Indonesia and Nigeria will be in need, Nguyen told ctv.ca in a telephone interview from Rome.
The haunting shortage
Last spring, evidence of the rice shortage could be seen in local markets from Manhattan to Manila, forcing many families -- and in the worst cases entire villages -- to go without the staple.
The crisis peaked in May 2008 when prices soared to levels three times higher than prices at the beginning of the same year. The most basic Thai 100 per cent white B-grade rice was selling for US$385 per tonne in January 2008, before sky-rocketing to US$963 by May, FAO data shows. Currently, the price hovers around the US$540 mark, Savage said.
A perfect storm of factors all but wiped out crops in the major rice producing countries, causing the crisis.
* Drought in Australia, floods in the Philippines and unfavourable growing conditions in other rice-producing countries led to weak first-round paddy harvests.
* Soaring oil prices increased the cost of much-needed fertilizers and basic transportation costs.
* High oil prices increased incentives for farmers to abandon traditional crops in favour of other commodities used in the production of biofuels, such as corn.
* A weak U.S. dollar, the world's rice buying currency, made it difficult for rice-importing countries to purchase the grain.
* Booming populations in countries such as India increased global demand for rice significantly.
* A growing upper class in countries such as China inflated the cost of available varieties.
"Those volatilities don't go away overnight," Savage said.
Looking forward
The single biggest factor affecting world rice stocks in 2009 will be climate, Nguyen said, citing drought as the biggest rice-killer.
The second most important variable in the price of rice will be oil, he said. When oil costs are high, fertilizer and transportation costs increase which directly hurts farmers.
The global economic downturn isn't helping either, the FAO recently suggested.
"Although less expensive rice on world markets should have boosted import demand in 2009, the uncertainty arising from the financial crisis has marred expectations for trade next year," the agency projected on its rice commodities website.
And although costs are coming down, the price of rice hasn't fallen in step with the recent steep declines seen in the cost of wheat, for instance.
The "aftermath" of the May 2008 price spikes left export bans in its wake, Savage said. Non-basmati rice varieties are still barred from leaving countries such as India and Egypt.
Current thinking in India suggests the government is unlikely to lift the ban before the federal election next spring, if it's lifted at all, Savage said. "Nobody really knows."
Making matters worse, expensive inventories are creating a backlog and overpriced rice is filling warehouses in places such as India, Savage said.
The pricey stock lingers in storage because export bans keep it from getting to those who need it in other countries, and many locals simply can't afford it.
So, even with secure stockpiles, the FAO expects the volume of rice trade to contract in 2009.
But there is a glimmer of hope in the fallout from the international rice crisis, Savage said. Struggling paddy farmers are earning fairer wages. Traditionally, rice farmers have been paid too little for their crop, Savage said.
"So in some ways I'm quite pleased to see the rice prices a little higher," he said.
Savage expects current volatile market conditions to persist in the coming months, although not necessarily to the extent seen in 2008.
"There will be nervousness though," he said. "And nervousness creates volatility.