Rice jumps as Africa joins race for supplies
By Javier Blas in Nairobi and Roel Landingin in Manila / Financial Times /
April 4 2008
Rice prices rose more than 10 per cent on Friday to a fresh all-time high as African countries joined south-east Asian importers in the race to head off social unrest by securing supplies from the handful of exporters still selling the grain in the international market.
The rise in prices – 50 per cent in two weeks – threatens upheaval and has resulted in riots and soldiers overseeing supplies in some emerging countries, where the grain is a staple food for about 3bn people.
The increase also risks stoking further inflation in emerging countries, which have been suffering the impact of record oil prices and the rise in price of other agricultural commodities – including wheat, maize and vegetable oil – in the last year.
Kamal Nath, India’s trade minister, said the government would crack down on hoarding of essential commodities to keep a lid on food prices. “We will not hesitate to take the strongest possible measures, including using some of the legal provisions that we have against hoarding,’’ he said on Friday.
Thai medium-quality rice, a global benchmark, traded at about $850 a tonne on Friday, up from $760 a tonne last week, while the price of less representative top-quality aromatic rice broke the $1,000-a-tonne level for the first time, traders said. They added that the grain was being sold to African destinations.
In Chicago, US rice futures hit an all-time high of $20.45 per 100 pounds.
Although only a small amount of the grain is traded internationally, the rise in Thai prices signals the trend for the global market and also for domestic prices in countries where local production is enough to meet demand.
The price jump came as leading exporting countries, including Vietnam, India, China and Egypt, banned foreign sales. Hanoi extended its ban for two extra months until June.
Food aid officials said consumption could rise further because record food prices are forcing families to move from a diversified diet to just one staple.
Farmers delaying their harvest and middleman hoarding stocks are also contributing to the crisis, said governments and traders.
In the past weeks, traders and diplomats have warned that many West African countries, where rice is a staple, had yet to purchase the grain this year, leaving them subject to record prices now.
Toga McIntosh, Liberia’s minister of economic affairs, said earlier this week that rice was “always on the table” in his country. “We are very dependent on imports.”
Nigeria, Senegal and Ivory Coast are also among the world’s top 10 rice importers.
Some countries postponed their imports earlier this year when prices started to climb, in the hope that the increase was a short-term anomaly, but now these countries are buying, traders said. Rice-importing countries are responding to the price surge by slashing custom duties and reforming their purchase systems to secure the grain.
The Philippines, the world’s largest buyer of rice, on Friday said it was doubling the import quota allotted to private traders to 600,000 tonnes in a bid to boost rapidly dwindling rice stocks after the government failed to attract enough offers in the past three tenders.
>Rush to restrict trade in basic foods
>By Alan Beattie in London / Financial Times / April 1 2008 19:05
Governments across the developing world are scrambling to boost farm imports and restrict exports in an attempt to forestall rising food prices and social unrest.
Saudi Arabia cut import taxes across a range of food products on Tuesday, slashing its wheat tariff from 25 per cent to zero and reducing tariffs on poultry, dairy produce and vegetable oils.
On Monday, India scrapped tariffs on edible oil and maize and banned exports of all rice except the high-value basmati variety, while Vietnam, the world’s third biggest rice exporter, said it would cut rice exports by 11 per cent this year.
The moves mark a rapid shift away from protecting farmers, who are generally the beneficiaries of food import tariffs, towards cushioning consumers from food shortages and rising prices.
But economists warned that such actions risked provoking an upward spiral in global food prices, which have already been pushed higher by rising demand from emerging markets like China and India and pressure on land from the growing production of bio-fuels.
“There are so many speculators in the market that when something happens to affect supply, there is an immediate reaction,” said Paul Braks, commodities analyst at Rabobank, one of the largest agribusiness lenders.
“Markets are very tight, and when you see net exporters imposing these export restrictions to stabilise domestic food prices, it makes the market nervous.”
Mr Braks said volatility in food prices had been exacerbated by problems in financial markets. “The credit crunch has pushed a lot of investors into commodities as a safe haven,” he said. “If they get their fingers burned, they are likely to withdraw.”
Kamal Nath, Indian trade minister, said food shortages were becoming one of the most pressing trade issues. “It is ... probably our number one problem,” he said. “World food stocks have never been lower.”
India, which became self-sufficient in food in the 1970s, has imported substantial quantities of wheat and other staple foods over two years in response to shortages and higher prices.
Mr Braks said that even highly productive exporters such as Ukraine were imposing export restrictions on wheat, though a good harvest in the autumn should see more grain being released on to the world market.
In the medium term, high prices should encourage more land to come into production, particularly in Ukraine and Russia. “World grain prices are likely to be high and volatile over the next two crop years, and then from 2010 the supply response should start to bring prices slowly down,” he said.
Disputes over sharing the costs and benefits of higher food prices have shot up the political agenda in many developing countries as sharp reductions in purchasingpower, particularly for the urban poor, have put increasing pressure on governments.
Global rice prices have risen by a third since the turn of the year, and higher soyabean costs have sparked protests in countries such as Indonesia.
In Argentina, farmers have protested against attempts by the government of Cristina Fernández to redistribute the benefits of rising commodity prices by increasing export taxes on soyabeans and other crops. In the Philippines, government investigators have raided warehouses suspected of hoarding rice. |
