Rice prices soar, sowing global fears

With drought, disease, and farmers planting crops for biofuels, it's a matter of supply and demand. Riots and hoarding have occurred.

Sun, Apr. 6, 2008
By Ariana Eunjung Cha
Washington Post

SHANGHAI, China - A spike in the price of rice and other food staples is triggering consumer panic, including food riots in Yemen and Morocco, and hoarding in Hong Kong.

Governments have taken radical measures in recent weeks to control their countries' supplies of rice. Egypt last week said it would ban all rice exports for six months. Cambodia has stopped all private-sector exports of rice, and India and Vietnam also have imposed restrictions.

The price of grains - corn, wheat and rice - has been rising since 2005 under pressure from farmers who would rather plant crops for biofuels than for food; the lack of technological breakthroughs in crop yields; and drought and disease.

The sharpest increase has been this year, with the price of Thai rice, a world benchmark, nearly doubling since January, to $760 per metric ton. Some analysts expect that price to reach $1,000 in the next three months.

Tang Min, a former chief economist for the Asian Development Bank, said the price increase is the consequence of supply and demand. "The world population is increasing, but the increase in the planting of rice has not been as fast," he said.

Despite efforts by governments to increase public-sector wages and introduce food subsidies, price increases and shortages have led to violent clashes along supply lines, in food distribution centers, and at supermarkets.

"Rice shortages and unrest are not necessarily linked, until you think about the poor. Rice is of high importance in these people's daily lives," said Tang, deputy secretary general for the China Development Research Foundation in Beijing.

Nowhere is that more true than in Asia, where a meal isn't a meal without rice.

Wang Qing, an economist for Morgan Stanley in Hong Kong, said U.S. laws encouraging the development of biofuels are the origin of the problem in Asia and elsewhere. This "directly led to the reduction of foodstuff planting," he said. "Without the oil price increasing substantially, the corn price will not increase. Without corn prices increasing quickly, the rice price will not rise."

To encourage farmers to go back to planting food, China, Indonesia and other countries are increasing their minimum compensation to farmers who grow grains for human consumption.

But as food-growing countries move to increase production and curb exports, they are under pressure from rice-importing neighbors seeking their help. Bangladesh has announced that it would import 400,000 tons of rice and sell it to consumers below cost.

The Philippines, where demonstrators have taken to the streets to criticize the government for not doing enough to control inflation, is appealing to other countries for emergency supplies.

Cambodian Finance Minister Keat Chhon last week called for people to be calm and "not to stock up on foods, which could make the situation even harder."

The battle against food inflation has been as much psychological as practical.

In the Middle Eastern states of Bahrain, Jordan and the United Arab Emirates, workers have mounted demonstrations out of frustration that their purchasing power has diminished.

In Morocco, state news media reported that dozens of people have been sentenced to prison for rioting, and in Yemen at least a dozen people have been killed since late last year in clashes related to food prices.