Troubled times ahead
Troubled times ahead as harvest shortages hit home
The rice market is a good indicator for the political stability of Asia, Jonathan Pincus, the chief economist of the UN in Vietnam, told The Times. Since the new year Asian rice prices have trebled and in some local markets they have risen tenfold in the past year. With staples such as wheat also surging, the World Bank, for one, says it does not believe there will be any moderation in global food prices until 2010 and that 33 countries face the prospect of civil unrest.
In India and China, the biggest consumers of rice, politicians have grown used to trumpeting their economies’ explosive growth have been wrong footed. The rice spike has taken governments by surprise even though the conditions behind it have been festering for years.
Most of the rice crops in the world are consumed by the countries that produce them, which means that the global trade in the commodity is thin. In an average year more rice is eaten by rats in Asia (as much as 17 per cent of the crop in some countries) than is traded across the world (about 6 per cent). Because of the small volumes the world market is prone to violent swings.
According to US officials stocks were at a 25-year low this year, which means that the smallest of shocks has had an even larger effect on prices. And there have been shocks. In India, amid a dearth of investment, agricultural productivity growth has ground to a halt and now lags behind population growth. In China, where the factories have replaced vast areas of paddy fields, a cold winter raised concerns about harvests.
A six year drought hit the Australian crop and the International Rice Research Institute gave warning of pest problems in Vietnam, a key exporter. Several countries have banned exports, piling more pressure on global supplies. Last month the Philippines, a country facing shortages, could not find enough rice. Traders offered to sell the nation 325,000 tonnes. The average price, of nearly $680 (￡343) a tonne, was up more than 40 per cent from January.
The head of the World Food Programme, which is feeding the equivalent of the population of Britain, wrote to the rich nations last month to plead for emergency funds. The body, responsible for providing for the poorest people in the world, estimated it needed an extra $500 million. By the time the letter was delivered – three weeks later – its food bill had risen by a fifth.
Blakely, R. (2008 April 28) The Times
1Draw supply and demand curves which illustrate the changes in the global market
2Which countries consume most rice crops?
3Why has the crisis arisen?
4Why is the market subject to violent swings?
5In no more than 5sentences offer your solution to the problem
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