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Rising price of rice keeps U.N. scrambling to feed world's hungry

From Kenya to Cambodia, the World Food Program's offices are struggling to meet their budgets in the face of price increases, sometimes having to suspend vital programs.

from the May 21, 2008 edition

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An American from Queens, N.Y., Menage started her work with the UN in Burundi in the 1980s as a volunteer and has, over the years, served the WFP in senior positions in Malawi, Togo, Zimbabwe, and Tanzania. She is not someone who loses her cool under fire. But this food crisis has tested even her mettle.

"You can't get into a frenzy," she explains. "You just deal with one issue at a time.... You analyze the markets from a food security angle. You stay calm. You coordinate properly and band together."

The first challenge, she says, is to figure out where there is affordable food in the world, what sort of food it is, and whether it is acceptable to those who are – or will be – hungry.

This is not as straightforward as it might seem. In some parts of the world, like West Africa, it's possible to exchange one grain for another, which allows WFP to distribute whatever commodity is most affordable. In Asia, however, where the words for "rice" and "food" in many languages are often interchangeable, there is no readily acceptable substitute for rice in the diet. That limits the UN organization's options.

Another challenge is the time crunch. In Panama, WFP's chief Latin America regional procurement officer, Snjezana Leovac, explains that typically it takes two or three weeks to examine tender bids, verify prices, and investigate suppliers. In today's tight markets, a good deal on a shipload of wheat could be gone the next day.

"We have to act fast and adjust our setup in the office in order to buy food as quickly as possible," says Ms. Leovac, a Croatian charged with coordinating the procurement at the 11 country offices in her region. "The prices are changing so quickly ... so if I take 15 days to confirm an offer, the price is going to be higher," she says. The mood in the office, she admits, is "not easy."

Once bids have been accepted, the next challenge is getting the food to the needy – a process made much harder because, like Cambodia, many countries have now banned the export of grain crops.

Typically, the WFP prefers to buy as much of its commodities as possible in the country where it distributes them – which encourages local farming. But it will purchase outside the country if the prices are more attractive, or if buying too much in one country will overburden the market.

For example, if Kenya experiences a bad harvest and its corn prices go up, the WFP will buy in, say, neighboring Uganda where the harvest might be better and prices cheaper. Even when there are no crises, favorable prices will lead the WFP to buy in one country rather than another. In fact, Uganda sold the WFP a whopping 210,000 tons of grain last year – which was then distributed across the Great Lakes region of Africa.

But the growing number of export bans is creating new stresses in this system. Egypt, India, Cambodia, and Guinea have totally banned exports of rice and other staples. Pakistan and Kazakhstan have banned wheat exports and Russia raised taxes on exported wheat by 40 percent. China, Brazil, Argentina, and Vietnam have all added restrictions to limit export sales.

Such moves, while they often succeed in lowering local prices, can also lead to panic buying as people stock up in case of future shortages – and create even more shortages at home . In turn, that makes less available for export. It can be a vicious cycle.

"Governments are very nervous at the moment and feel they have to keep what they have for their own people – which ends up blocking the cost-efficient flow of food and limiting the playing field," says Menage.

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