While record high prices for corn, soybeans and wheat have held the lion’s share of market attention in the United States for months, unprecedented prices gains for rice and fear of shortages of the world’s major food grain have claimed global market and general media attention in recent weeks.
Restrictions on the sales of certain types of rice at the two largest U.S. wholesalers, Costco Wholesale Corp. and Sam’s Club, a division of Wal-Mart Stores, Inc., last week brought the situation to light domestically and gained widespread media attention. Sam’s Club limited customers to four bags at a time of imported Jasmine, basmati and long-grain white rice and Costco put limits on bulk rice purchases "in at least some stores." Neither company gave specific reasons for the controls.
The situation in the U.S., where supplies of some types of rice are tight but there is no shortage, doesn’t compare to more desperate events in several other countries, mostly less-developed, where riots over food prices and supplies, including rice, occurred in recent weeks. Deadly rioting over high food prices forced the resignation of the prime minister of Haiti earlier in April and resulted in the president of Haiti announcing a 15% reduction in rice prices.
Astonishing gains were scored in rough rice futures prices at the Chicago Board of Trade in April as daily trading limits expanded to 75c a cwt regularly to accommodate the backlog of trades at the regular 50c limit. Record high prices were set almost daily at mid-month, topping near $25 a cwt in the July 2008 contract, compared with $19.61 on April 1 and $14.73 on Jan. 2. A year ago nearby rice futures prices were around $10 a cwt. Prices have more than tripled from three years ago.
Export prices also have soared to record highs in the United States and Thailand, where values more than doubled since late January, the U.S. Department of Agriculture said.
Steve Freed, director of research at ADM Investor Services, noted the run-up in rice prices differed from those of other crops.
"Wheat was weather driven, corn and soybeans were demand driven," he said, "but with rice, a lot of the countries that grow it decided not to sell it."
Temporary rice export bans or restrictions currently are in place in China, Vietnam, India, Cambodia and Egypt. Exports continue to flow from the United States and Thailand. U.S. rice export sales through April 10 were running 16% ahead of the same period last year, the U.S.D.A. said.
An analyst for a major food processing company agreed the rice "panic" was not a supply issue with stocks-to-use holding steady around 18% to 20% since 2003-04. Instead, he saw it as a public relations issue where countries curbed or shut off rice exports to "show they were doing something" about rising food prices to calm the public. Global 2007-08 rice ending stocks were forecast by the U.S.D.A. at 77.1 million tonnes, up from 75.2 million in 2006-07.
Global rice production for 2007-08 (ending July 31), is expected to be record large at 425.3 million tonnes, the U.S.D.A. said in its April 9 supply/demand report. Larger crops for the U.S., China, India, Vietnam, Burma, Thailand, the Philippines, Indonesia, Brazil and Pakistan for 2007-08 were forecast.
Thailand, the world’s largest rice exporter, was forecast to produce its largest crop ever in 2007-08 as was Burma. Additionally, Thai growers have planted a third rice crop this year to take advantage of high prices, according to news reports from Asia.
But that’s not to say global rice demand hasn’t been strong. Global disappearance was projected by the U.S.D.A. at a record 424.31 million tonnes for 2007-08.
Only about 7% of global rice production is exported, U.S.D.A. data shows, compared with about 18% of all wheat. With such little rice traded globally, reduced exports by only a handful of countries easily may affect available supply, trade sources said. Analysts expect rice prices to drop as the year progresses and larger crops are harvested, some export restrictions are lifted and the supply "panic" subsides.
This article can also be found in the digital edition of Food Business News, April 29, 2008, starting on Page 38. Click