Food riots fear after rice price hits a high

Shortages of the staple crop of half the world's people could bring unrest across Asia and Africa, reports foreign affairs editor Peter Beaumont

The Observer,
Sunday April 6 2008
Article history

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.

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.

The depth of the crisis for the poorest was underlined in stark terms by the World Bank's managing director at a meeting of finance ministers from the Asian block. Juan José Daboub said governments needed to take steps to protect the poor and also ensure that long-term solutions were found to relieve shortages. 'In virtually every East Asian country, high food prices are raising headline inflation and contributing to a significant decline in the real income of the poor, most of whom spend a big chunk of their income on food,' he said last week.