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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.

By Danna HarmanCorrespondent / May 22, 2008

Indonesian students distribute rice to poor residents near their Jakarta school. As the cost of many staples rises sharply, more people around the world need aid, and agencies are racing to find new sources of affordable food.

ED WRAY/AP

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Thomas Keusters bought several tons of rice in January, as he has done every year for the past three that he has been at the helm of the World Food Program (WFP) office in Cambodia. He thought he was set.

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The United Nations' WFP helps feed 1.8 million Cambodians (out of a population of 13 million) by providing rice to the ill, orphans, poor farmers, and hungry children.

Mr. Keusters, a Belgian who has worked for the WFP in Indonesia, Mozambique, Angola, and Sudan, has been through his share of crises. But he wasn't prepared for what came next. In March, panic buying – and hoarding – hit global rice markets.

Five of his suppliers – with a combined outstanding contract for 4,000 tons of rice – abruptly defaulted, unable to secure the rice at the prices ($390 a ton) they had promised the WFP.

They forfeited their 5 percent performance bond and pulled out of the deals.

"In a normal environment we would have basically blacklisted the suppliers," says Keusters. "But in the current environment we had to understand." So, he dived back into the now roiling rice market along with other aid groups and nations scrambling to secure food before the price rose higher.

Keusters and his team of 90 Cambodian and international staff put out calls to rice brokers. But the offers that came back, at $620 a ton, were almost double what they had budgeted. "We just could not live with that," he says.

Meanwhile, in an effort to stabilize local prices, the Cambodian government instituted an export ban on rice. Kuesters put out another call for bids, this time getting offers for $520 a ton. It was not ideal, but he took it. To stay within his budget, less tonnage was ordered. But it was clear there would need to be program cuts. The question was: Which ones? Or, who would not eat?

Searching for affordable food

Back at WFP main headquarters in Rome, Nicole Menage, who oversees all of the WFP's procurement operations, could only shake her head as the Cambodia saga unfolded. She was getting similar reports from her all of her buying agents.

The WFP has 18 dedicated food procurement officers, plus hundreds of others doing work related to food purchasing. These agents – a hodgepodge of Americans, African, Asians, Europeans, and Middle Easterners – are spread out among the headquarters in Rome, six regional offices (South Africa, Thailand, Uganda, Sudan, Burkina Faso, and Panama) and five country offices (Ethiopia, Indonesia, Kenya, Democratic Republic of Congo and Uganda).

Their job is to find and cultivate new suppliers, compare prices, write up contracts, and coordinate with both the fundraisers putting out appeals and the transport and logistic officers moving rice, wheat, corn, and other foods to those in need. Even in normal times, Ms. Menage admits, it can get hectic. And these are not regular times.

100 million hungry people

The UN's World Food Program spends close to $3 billion a year to feed some 73 million people in 80 countries around the globe. Last month, the World Bank warned that the current food crisis could push an additional 100 million people into severe hunger.

According to the US Commodity Futures Trading Commission, the price of rice over the past 12 months has soared 122 percent. For wheat, the increase has been 95 percent; for soybeans, 83 percent; and corn, 66 percent.

The WFP has put out an emergency appeal, announcing that it needs more than $500 million just to cover the increased cost of food aid it had already budgeted. The overall shortfall at the agency is currently $750 million.

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