Monday, April 7, 2008

Rice Price Increase in Asia

The major obstacle to saving the planet from its inhabitants is not technology.

"The problem is that 90 percent of energy is fossil fuels. And that is such a huge business, it has permeated our government,".

The industry is misleading the public and policy makers about the cause of climate change. And that is analogous to what the cigarette manufacturers did. They knew smoking caused cancer, but they hired scientists who said that was not the case."

Government public relations officials, filter the facts in science reports to reduce "concern about the relation of climate change to human-made greenhouse gas emissions."

"We've reached a crisis."

The policy makers, "the people who need to know are ignorant of the actual status of the matter, and the gravity of the matter, and most important, the urgency of the matter,"

Food Shoratge

Food shortage is most easily conceptualized as a production problem - not enough food is grown to meet regional needs - but constraints on importation as well as storage can also cause or contribute to food shortage. Food shortage is also created where food is exported from areas where production is adequate or even abundant.

Even when production shortfall is the primary cause of insufficient supply, the ecological and political reasons for production problems vary widely.

They range from natural disasters such as drought, flood, or fungus, to political disasters such as civil conflict, to misguided economic policies such as price controls- all of which discourage production of essential foods.

Although global food production has kept pace with world population growth, the rate of population growth has outstripped the rate of growth in food production significantly in some developing regions, and caused per capita food availability in these regions to decline.

One factor contributing to the shortage of wheat flour locally is that flour producers who export are taking advantage of the higher prices overseas, according to an economist.

Other factors were hoarding by wholesalers and panic buying by consumers.

“Malaysia, being a net importer of wheat to produce flour for local consumption, is affected principally by higher raw material costs faced by flour millers,” he said

The wheat shortage was mainly due to poor harvests in major producing countries, especially Australia which had suffered from drought in the harvesting season last year.

Some economists, believed rising prices of agricultural commodities including wheat was due to surging oil and gas prices. The surge had caused a spillover effect on the commodities and only a reverse in oil prices could bring down the prices.

Most agreed, food prices would continue to rise, marking the end of the “cheap food era.”

China, Egypt, Vietnam and India, representing more than a third of global rice exports, curbed sales this year, and Indonesia says it may do the same.

Investigators in the Philippines, the world's biggest importer, raided warehouses last month to crack down on hoarding. The World Bank in Washington says 33 nations from Mexico to Yemen may face ''social unrest'' after food and energy costs increased for six straight years.

Rice, the staple food for half the world, rose to a record $US20.50 per 100 pounds in Chicago on April 4, double the price a year ago and a fivefold increase from 2001. It may reach $US22 by November, said Dennis DeLaughter, owner of Progressive Farm Marketing in Edna, Texas.

''Rice will gain substantially over the next two years,'' said Roland Jansen, chief executive officer of Pfaffikon, Switzerland-based Mother Earth Investments, which holds 4% of its $US100 million funds in the grain.

Governments will likely maintain curbs on exports ''because those countries want to be able to continue to feed their own populations,'' he said.

The upheaval parallels turmoil in global capital markets that seized up nine months ago when subprime mortgages collapsed. The difference between what it costs the US government to borrow and the rate banks charge each other for three month loans ended last week at 1.36 percentage points. A year ago the gap was 0.33 percentage point.

Export Curbs

Rice growing nations are driving up prices for producers that want to sell abroad.

The Vietnam Food Association said April 2 it asked members to stop signing export contracts through June, following China, which imposed a 5% tax on exports as of January 1. Egypt banned rice shipments through October.

Prices ''are not coming back to the levels we came from,'' said Mamadou Ciss, head of Singapore-based rice broker Hermes Investments. Vietnam's 5% broken-grain rice may be 40% higher within three months, he said.

Record grain prices are stoking inflation. Wholesale costs in India rose 7% in the week ended March 22, the fastest pace in more than three years, underscoring the threat from rising food costs, the Ministry of Commerce and Industry in New Delhi said April 4.

The increase may boost profits for suppliers. Padiberas Nasional rose the most in seven years in Kuala Lumpur stock exchange trading last week. The company is Malaysia's only licensed rice supplier.

Curbing Exports

''There are lessons to be learned from what happened in the wheat market,'' said Darren Cooper, a senior economist with the International Grains Council in London. ''The market will adjust, and moving forward we will see some restrictions on demand.''

For now, governments are limiting exports to ensure they have enough food at home.

Vietnam, the third-biggest rice exporter after Thailand and India, will reduce shipments 11% this year to 4 million tons, Prime Minister Nguyen Tan Dung said March 30.

''Bread is losing its place as the main staple food and rice is replacing it, and this created the problem,'' Ali Sharaf Eldin, chairman of Egypt's Chamber of Grains, said in an April 1 interview.

Investigators in Manila caught profiteers last month who were repackaging 20,000 fifty-kilogram bags of rice from subsidized government supplies for sale as higher-grade grain, according to Ric Diaz, an official at the National Bureau of Investigation.

'Social Tension'

The Philippines' state-run National Food Authority allows suppliers to sell at a subsidized price of 18.50 pesos (44.23 US cents) per kilogram in low-income areas. People in the warehouse north of Manila were preparing to market the rice as a variety that sells for at least 35 pesos, Diaz said in a March 31 interview.

Drought is hurting plantings in China, where an estimated 19.4 million hectares (48 million acres) of arable land had been affected by March 26, according to Xinhua, the state news agency. Consumer prices in China, the world's fastest-growing economy, soared 8.7% in February, the most in 11 years.

''A constant price rise of rice can't be viewed as sustainable,'' said Abah Ofon, a commodities analyst with Standard Chartered in Dubai.

''As with any staple commodity, there's a risk of social tension when prices begin to rise.''

YOU will probably not taste the difference, but more of the rice noodles, or bee hoon, served these days are made from Myanmar grains, rather than the more expensive imports from Thailand.

This is how bee hoon manufacturers in Singapore, who together make about 80 tonnes of the rice noodle daily, have responded in recent weeks to global increases in rice prices.

Supplies seem stable for now, but the world’s demand is on Thailand’s shoulders,” said Saga Foodstuffs managing director Goh Hock Ho.

This month, his firm is expecting about 350 tonnes of white rice from Myanmar after buying none in March. “As a safeguard, we are sourcing supplies from elsewhere,” he said.

White rice from Myanmar is about S$200 (RM460) cheaper per 50kg bag than its Thai counterpart, he said.

Jimmy Soh, managing director of Chye Choon Foods, now uses about 10% less Thai white rice in his bee hoon than a month ago. He is also in the midst of “securing exports from China”, something “everyone is now trying to do”.

This is the result of rice shortages across Asia, as producing countries curb exports to ensure adequate domestic supply.

Last Thursday, the price of Thai rice, a global benchmark, jumped 30% to an all-time high of US$760 (RM2,432) per tonne after Egypt, a leading exporter, imposed a formal ban on selling rice abroad in a bid to stabilise soaring prices at home.

The Philippines, one of the world’s biggest importers of rice, is struggling to source supplies of up to 2.2 million tonnes this year as prices climb due to rising demand and tight inventories around the globe.

Rice Shortage in Asia

The time will come when people around the world, especially in Asian countries, will suffer from rice shortage if we do not address the threat now, said Director General Dr. Ronald Cantrell of International Rice Research Institute (IRRI).

Statistics show that there are about 8.5 billion people worldwide who depend on rice as their staple food. As population grows, rice demand increases which could eventually lead to its shortage in due time.

A global rice shortage that has seen prices of one of the world's most important staple foods increase by 50 per cent in the past two weeks alone is triggering an international crisis, with countries banning export and threatening serious punishment for hoarders.

With rice stocks at their lowest for 30 years, prices of the grain rose more than 10 per cent on Friday to record highs and are expected to soar further in the coming months. Already China, India, Egypt, Vietnam and Cambodia have imposed tariffs or export bans, as it has become clear that world production of rice this year will decline in real terms by 3.5 per cent.

The impact will be felt most keenly by the world's poorest populations, who have become increasingly dependent on the crop as the prices of other grains have become too costly.

Rice is the staple food for more than half the world's population.

This is the second year running in which production - which increased in real terms last year - has failed to keep pace with population growth. The harvest has also been hit by drought, particularly in China and Australia, forcing producers to hoard their crops to satisfy local markets.

The increase in rice prices - which some believe could increase by a further 40 per cent in coming months - has matched sharp inflation in other key food products. But with rice relied on by some eight billion people, the impact of a prolonged rice crisis for the world's poor - a large part of whose available income is spent on food - threatens to be devastating.

The consequences are visible across the globe. In Bangladesh, government-run outlets that sell subsidised rice have been besieged by queues comprised largely of the country's middle classes, who will queue for hours to purchase five kilograms of rice sold at 30 per cent cheaper than on the open market.

In Thailand yesterday - where the price for lower-quality rice alone has risen by between $70 and $100 per tonne in the past week alone - Deputy Prime Minister Mingkwan Sangsuwan convened a meeting of key officials and traders yesterday to discuss imposing minimum export prices to control export volumes and measures to punish hoarders. The meeting follows moves by some larger supermarkets in Thailand to limit purchases of rice by customers.

In the Philippines, where the National Bureau of Investigation has been called in to raid traders suspected of hoarding rice to push up the prices, activists have warned of the risk of food riots.

Fear is so deep that the country's agricultural secretary, Arthur Yap, this month asked fast-food restaurants including McDonald's and KFC - which generally supply a cup of rice with their meals in Asian branches - to halve the amount of rice supplied, so that none would be wasted. In addition, traders who try to stockpile rice have been warned that they face a charge of 'economic sabotage', which in the Philippines carries a life sentence.

The shortage has afflicted India, too: on Monday, the government banned the export of non-basmati rice and also raised the price of basmati rice that can be exported.
And although China has said it is secure in its supplies of rice, the fact that the government has offered to pay farmers more to produce more rice and wheat suggests otherwise.

Food riots fear after rice price hits a high

The sharp rise in rice prices has been driven by many factors, not least by a race between African and South-east Asian countries to secure sufficient stocks to head off the risk of food riots and social unrest.

Fears over the potential impact of the rice crisis has been heightened by estimates by both the UN Food and Agriculture Organisation - which has predicted the 3.5 per cent shortfall - and comments from the World Bank president, Robert Zoellick, on the organisation's website, estimating that '33 countries around the world face potential social unrest because of the acute hike in food and energy prices'.

According to the World Bank's figures, the real price of rice rose to a 19-year high last month, while the real price of wheat has hit a 28-year high.

Analysts have cited many factors for the rises, including rising fuel and fertiliser expenses, as well as climate change. But while drought is one factor, another is the switch from food to biofuel production in large areas of the world, in particular to fulfil the US energy demands.

A continuing change in the global diet is also putting a further squeeze on rice. In China, for example, 100 million rural migrants to the country's big cities have switched from a staple of wheat to rice as they have become wealthier.

Rapid recent price increases are also likely to have a dangerous secondary effect of stoking further inflation in emerging countries, which are already suffering from record oil prices and surging agricultural commodity prices.

Rice Price Increase

Thailand will expect a further surge of rice price in near future as global demand for the staple grain continue rising in face of a food shortage crisis in some countries.

Thailand's Deputy Prime Minister and Commerce Minister Mingkwan Saengsuwan on Friday projected the export price of the Thai jasmine rice or fragrant rice would double, reaching 30,000 baht (some 968 U.S. dollars) per ton in the next quarter from the present 15,000 baht (484 dollars) per ton, if the ongoing global food crisis persists.

Several traditional rice exporting countries, including Philippines and Cambodia, have recently stopped or cut their rice export to lessen a domestic food shortage. Therefore demand for Thai rice has continued rising in recent years, driving up the export price from some 6,500 baht (about 210 dollars in current exchange rate) per ton three years ago to 15,000 baht per ton (484 dollars) now.

Some officials and experts in Thailand have warned that the country could face a domestic rice shortage itself after skyrocketing prices on overseas market have encouraged traders to increase export volumes.

The Bangkok Post newspaper on Friday quoted Prasert Kosalwit, the director-general of the Rice Department, as saying on Thursday that rice shortage in the local market is "very likely."

Concerns over shortages could lead to the introduction of measures to control the amount of rice exported in the second half of this year if the price continues to increase, according to Prasert. The measures have been floated by Deputy Commerce Minister Wiroon Techapaiboon.

The stockpile under the supervision of the Commerce Ministry is 2.1 million tons. That could ease domestic rice shortages for about three months, said Prasert.

In case the rice stocks are used up and the rice shortage gets worse, the Rice Department will encourage farmers to grow a mixed breed paddy with a higher yield and a shorter growing period -- only 110 days.

Rice shortage has been witnessed in several countries in Asia, where the population relies on the grain as their major staple food.

The Cambodian government on Thursday asked people not stock up on food commodities after the government banned rice exports on Wednesday.

The Philippines has signed a purchase agreement with Vietnam for 1.5 million tons of rice this year to alleviate an expected shortage in coming months, after the government admitted the country was facing a serious rice supply crisis.

India has banned export of rice, while Vietnam has reduced export volumes.

Rice Exporters Association President Chookiat Ophaswongse agreed that the rice price and global demand would rise further from the second quarter of this year.

He said the expected orders from two regular customers -- Iran and Indonesia, at at least one million tons and more than 1.5 million tons respectively, in the middle of this year, have prompted rice millers and farmers to hoard rice for future speculation as well.

But Chookiat said he is confident the government rice stockpile of 2.1 million tons would be enough to prevent a rice shortage for three to four months until paddy from the new season is harvested.

Thailand could face problems only when it exports more than 9 million tons a year, he said. Thailand's rice export volume stayed at more than one million tons per month over the past five months from October last year to February this year. If export volume continues, a shortage is possible, according to Chookiat.

Chookiat suggested the government to take measures to keep the export price at a higher level to prevent excessive export and avoid a rice shortage crisis.

Malaysia Rice Stock

Malaysia has no plans to raise the retail price of rice but efforts are under way to ensure adequate rice stockpiles in case of a shortage of supply, Deputy Prime Minister Najib Razak said Monday.

The government regulates the price of rice, which is one of the essential items it subsidizes. It also gives financial aid to rice farmers, who produce about 70 percent of the country's rice needs.

Najib acknowledged that global rice prices have surged sharply but said the government has no immediate plans to cut the rice subsidy. He didn't say how much the government spends on subsidies for the grain each year.

Rice prices on world markets have jumped 50 percent in the past two months and at least doubled since 2004.

"At the moment, there is no plan to increase the price of rice but obviously, we have to look in terms of supply to make sure there is enough stockpile in the country," he told reporters.

Malaysia imports rice from neighboring countries such as Thailand, Vietnam and Cambodia. But rising prices and worries over domestic supply have forced major rice exporters including Vietnam, Cambodia and India to curb overseas sales recently.
"We are monitoring the situation very closely," Najib said.

"We know the market is tighter now. We'll have to step up our efforts to increase the supply of rice as part of our stockpile. We will have to source around the region."

The government will also boost efforts to increase domestic production of rice, he said, without giving further details.

Malaysia stockpiles rice through Padiberas Nasional Berhad, the country's sole rice importer and distributor. Critics say the agency has not built a sufficient reserve to meet a possible shortage. No data is immediately available on the country's rice stockpile.

The government last year spent 43.4 billion ringgit (US $13.6 billion) on subsidies for gasoline, rice, cooking oil, steel, cement and other items deemed essential. The bulk of the subsidies go to fuel, which in Malaysia is among the lowest priced in Asia.

Experts blame the rise in rice prices on costlier fuel and fertilizer, as well as harvests curtailed by disease, pests and climate change. There are concerns prices could rise a further 40 percent in coming months.