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Grain prices soar globally

Rice shortages are appearing across Asia. In Egypt, the Army is now baking bread to curb food riots.

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The FAO expects food prices to stabilize and eventually drop as farmers plant more grains. That’s already starting to happen with wheat and corn. But the next few years could be difficult.

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On Monday, the WFP, a UN agency that distributes food aid to some 70 million poor people, made an “extraordinary emergency appeal” to donor countries for $500 million to prevent cutbacks in its global operations.

In the past two weeks, two rice suppliers in Cambodia defaulted on contracts with the WFP, claiming the new higher prices would offset any penalty for reneging on the contract.

“That’s extremely worrying, as it indicates the price of rice, just like the price of wheat, is now continuing to increase,” says Paul Risley, a WFP spokesman. “That makes it very difficult for us to find rice at an affordable price. The ability to end malnutrition is limited when food prices are so high.”

Countries with higher foreign exchange reserves and food stocks, including China, Japan, and India, can still afford the high food prices if necessary. But nations with low currency reserves like the Philippines, Pakistan, Bangladesh, and Nepal may need assistance from international financial institutions to afford food if prices continue to spike.

Although higher food prices mean trouble for consumers and governments, they do increase incomes for farmers – assuming their crops aren’t stolen. Still, farmers aren’t making as much money as a middleman with a good-sized warehouse.

Rice millers in Thailand are defaulting on contracts with exporters to capitalize on higher prices, and speculators are renting warehouses to store paddy. Rice in paddy form (in the husk) can be stored for about a year and a half before quality starts to deteriorate, and milled rice can be held for another six months.

“Nobody dares to sell now as we don’t know where the price is going,” says Chookiat Ophaswongse, president of Thailand’s Rice Exporters Association. Although Thailand, the world’s largest rice exporter, has shipped record amounts in January and February, traders have lost money on futures contracts as prices have jumped more quickly than anyone expected, he says.

In the Philippines, President Gloria Macapagal Arroyo has vowed to crack down on rice hoarders. The government has ordered police to stake out warehouses and follow trucks to see where the rice was going, she said.

Thailand may try to sell off 2.1 million tons of rice stocks to keep domestic prices low. But as long as prices stay high, Thai farmers will need to burn the midnight oil keeping watch over their fields.

“Most farmers must sell crops immediately as they don’t have a good warehouse that can withstand attacks from rats, birds, chickens – or human thieves,” says Mr. Sarayouth.

Associated Press reports were used in this story.