Rice prices straining developing nations
Prices on food have been soaring worldwide, including rice, which has doubled in the last couple of months. And the staple for so many people and cultures could get even more expensive. Jeff Tyler reports.
Workers from the Philippines' National Food Authority bag kilos of cheap imported rice from Vietnam on April 01, 2008 in Manila. President Gloria Arroyo has promised to import more rice from neighboring countries to replenish stocks of the staple grain amid a supply crunch that could cause sharp price hikes. (Jay Directo/AFP/Getty Images)
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Kai Ryssdal: All the money streaming into the stock market today had to come from somewhere. Commodities were part of it.
Gold hit almost 870 bucks -- it was over $1,000 a week ago. Oil was down as well.
But some commodities have been going the other way. Rising grain prices led to riots in Egyptian bread lines a month ago. Rice had doubled in the last couple of months. Yesterday, workers at a Nike factory in Vietnam where rice is a staple went on strike for higher pay to offset higher consumer prices
Marketplace's Jeff Tyler considers supply and demand.
Jeff Tyler: As India and China grow -- and grow more wealthy -- demand for rice is rising. At the same time, supplies have been hurt by a drought in Australia, floods in Bangladesh and a plant virus in Vietnam.
Nicholas Minot is a senior fellow at the International Food Policy Research Institute.
Nicholas Minot: Small shifts in a country importing when they normally export or exporting less than they normally do can have an inordinate effect on the world market price.
Currency exchange rates have an impact too. So says agricultural economics professor Bruce Babcock at Iowa State University.
Bruce Babcock: You're also seeing a lot of prices being set in U.S. dollars and so, just like oil prices have gone up because of the fall in U.S. dollars, so too have the prices of food commodities.
Rice producers like India, Cambodia and Vietnam have put restrictions on exports. Some farmers in the region are already hoarding rice supplies, waiting for prices to rise even higher. But Nicholas Minot sees a silver lining in that kind of speculation.
Minot: It's actually not such a bad thing. It's saving rice for later months when you expect the shortage to be even worse.
The U.S. Department of Agriculture forecasts that this year global rice stockpiles will fall to their lowest levels in 25 years. That could spell big profits for growers in Thailand, the world's largest exporter of rice.
Thai rice currently sells for about $760 per metric ton. The Thai commerce minister predicts rice will hit $1,000 a ton.
I'm Jeff Tyler for Marketplace.
