Food price inflation shows no sign of easing with the world’s most important staple, rice, swept up into the maw of falling stocks, rising demand and soaring prices.
World rice prices jumped 30% late last week to around $US760 a tonne for Thai rice, the benchmark because Thailand is the world’s biggest export. Higher quality fragrant Thai rice now costs $US900 a tonne, up 30% as well.
According to Reuters, that was a rise of 30% on the previous day’s $US680 a tonne, but other reports claim the price ended up around $US700 a tonne.
But what is not in dispute is the sharp rise in prices since January.
Thai rice was selling for around $US380 a tonne but falling world stocks, indifferent production in parts of Asia (China) and increasing demand from Asia, the Middle East and Africa, have combined to drive prices higher. Rice stocks, like wheat are at their lowest level around the world since the mid 1970s.
Rice doesn’t have the formal markets based pricing that wheat, corn, soybeans and canola/rapeseed does.
It’s more cultural and informal, depending on long established trade and Government arrangements through Asia, the Middle East and Africa. But there’s no reference pricing as corn, wheat and soybeans have with the Chicago Board of Trade futures market.
But what is interesting is that rice’s surge matches the sharp rises in the price of corn, soybeans and wheat, especially in January and February.
Prices for those grains have eased in the past three weeks from record highs but have been set running again when the United States Department of Agriculture overnight released its first plantings intentions survey for the US for the year, covering wheat, corn, soybeans, cotton and rice.
The fall in corn plantings was larger than expected as US farmers switch to soybeans and wheat: that could see corn prices surge sharply and wheat and soybeans fall.
The USDA said American farmers would plant 86 million acres of corn this year, down 8.1% from last year’s 93.6 million — which was the biggest in 60 years.
That’s still high by historical comparisons, but prices rose 8.50 US cents to $US5.59 a bushell on the Chicago Board of Trade. The news though may get worse for corn users, such as the struggling ethanol industry.
US farmers plant corn first because of its longer growing season to maximise yields.
Major growing areas currently are suffering from wet and soggy ground so they could be forced to switch to soybeans which would further cut plantings and put upward pressure on prices.
Wheat futures prices fell to a two-month low in Chicago after the USDA said growers would lift wheat plantings this season.
The agency said farmers would plant around 5.5% more wheat with around 63.8 million acres being seeded.
Planting of spring-wheat varieties will jump 7.8% to 14.3 million acres, while durum rises 22% to 2.63 million acres, the USDA said.
The current futures contract fell 60 US cents to $9.29 a bushell, well below the $US13 a bushell and more paid in February.
Soybeans futures also fell on the CBOT after the USDA said farmers will boost plantings by 18%, which was more than forecast.
US growers are expected to plant up to 74.8 million acres, up from 63.6 million last year. Prices had jumped 64% but yesterday soybean futures for May delivery fell the 70-cent maximum allowed on the Chicago exchange, or 5.5%, to $US11.9725 a bushell.
But US and world stocks of all grains are at multi-decade lows, so the higher plantings and potential production in the US won’t have all that great an impact.
But the news will add to the speculative pressures in food prices.
Argentinian farmers called off a strike on Saturday that had cut wheat, soybeans and beef supplies domestically and internationally. The strike was called after the populist Peronist Administration lifted taxes on all exports of grain, oilseeds and beef, ostensibly to keep more in the country, nut in reality to raise money revenues from soaring world prices.
Last year saw protests in Italy and Mexico against high prices for corn and pasta flour; Russia and China introduced price controls on food and oil and other countries noticed rising social unrest over the price of staple foods.
Last week’s jump in rice prices followed a move by Egypt, a rice exporter, to ban all shipments overseas for at least six months to try and keep down local prices, and the Philippines revealed plans to buy rice on world markets to replenish depleted local stocks.
The Philippines is the world’s biggest importer, buying up to 1.8 million tonnes annually, but it will have to buy from the emergency stocks of Government in Vietnam and Thailand to fill an order for 500,000 tonnes.
Vietnam said Friday that it would cut rice exports by nearly a quarter this year, India effectively banned the export of all but the most expensive grades of rice and neighbouring Cambodia banned all rice exports except by government agencies.
Since January, the Pakistani Government has been using troops to guard trucks carrying wheat and flour; Indonesia has seen protests over soybean shortages, and China has put price controls on cooking oil, grain, meat, milk and eggs.
Newsagencies have reported protests (some call them ‘riots’) in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen as consumers complain about the rising cost of food.
In Thailand last week newsagencies reported the theft of high grade rice from farmer silos
These are all signs of the pressures the soaring price of rice and other gains is having around the world and why food prices will be the big issue in 2008.
The United Nations has already warned the soaring cost of grain will leave a shortfall in its food aid this year and wants donor countries to pay an extra half a billion dollars to finance existing
