Rice no longer seen as sole source of stability

by Morton Sosland
Share This:

Early this year when renewed concern was first developing about strength in global wheat and corn prices, a senior economist at the Food and Agriculture Organization of the United Nations pointed to rice as “the only grain separating the world from a food crisis.” A half-year later, the F.A.O. and many other observers of the world grain situation no longer counted rice as the crop that will avoid experiencing this year’s dramatic advances in prices that have periodically characterized major markets. Exploring why rice is no longer considered the global exception to tightness also permits examination of conditions ruling in other grains that impact grain-based foods in America and around the world.

Upturns in rice, boosting prices for a time to the highest since the trauma of 2008 when record levels were reached, are largely attributed to moves by a single country, Thailand. As the world’s largest exporter of rice, accounting in a typical year for nearly a third of volume, Thailand has usually pursued domestic policies directed toward spurring export business. But the election of a new government early this summer signaled dramatic change, primarily by fulfilling a campaign promise to bolster returns to domestic farmers by sharply increasing guaranteed domestic prices. Even before the start of the Thai rice harvest last month, prices had sharply climbed, propelling markets in Southeast Asia and around the world, including the Chicago Board of Trade futures contracts.

Election victory by the Pheu Thai Party was followed by immediate announcement that the government would start buying rice in October at 15,000 Thai baht ($500) per tonne. That was dramatically above the 11,000-baht price that had ruled prior to the election. The move prompted forecasts that Thailand’s export prices would climb to $700 per tonne and higher by the end of the year as farmers held back selling to take full advantage of the new government’s purchase guarantee as well as other steps to improve the lot of small farmers. Prices in many Southeast Asian nations, which as a group accounts for nearly 90 per cent of world rice consumption, climbed by as much as 25 per cent. U.S. prices briefly scored similar upturns. For Thailand, the net result may be a drop of as much as 20 to 30 per cent in rice export volume due to prices out of line with other shippers.

Like the hugely bullish impact last year of Russia’s decision to ban grain exports, this Thai government action once more reminds of the influence governments may have on global markets. Rice is the only grain where market analyses make no mention of the strengthening influence of the U.S. ethanol program, with mandatory inclusion in motor fuels. It is ironic that rice prices suddenly caught up with other grain and food prices overall, not because of any shortfall in production or drawdown in stocks, but simply because of a single nation’s move to raise the income of its small farmers. Indeed, prospects currently are for record world production of rice as well as a new peak in global ending stocks for 2011-12.
To see rice prices advancing, including U.S. domestic prices for a time near peaks of 2008-09, because of such moves across the world underscores the way governmental interference in world food markets often has negative consequences. In still voicing continuing alarm about the horrific effects of rising global food prices, especially in regions of the world hurt by a poor growing season, the F.A.O. economist cited earlier now worries about the loss of stability in world rice prices, especially in comparison with other grains. “Now this is changing and rice is rallying, and the international situation is likely to worsen,” said Concepcion Calpe of F.A.O. “Wheat may become the stabilizing foodstuff,” he says in an observation that emphasizes the way American grain-based foods, even while feeling removed from the global rice situation, finds itself directly affected.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.