Soaring rice prices hurting Asia's neediest nations

The soaring price of rice has triggered a supply and demand crunch that is hurting some of Asia's neediest nations, forcing them to spend more on imports, industry experts and officials say. For the likes of Thailand and Vietnam, the world's two biggest exporters of the grain, the rising demand is a money-spinner with rice now selling at more than US$500 a tonne in Bangkok and nearly as much in Hanoi. At the end of February, Thailand's benchmark rice was trading at more than US$500 a tonne, a rise of more than US$100 from a month earlier and up from just US$325 a year ago. But from Bangladesh to the Philippines, from India to Indonesia, the squeeze is bad news as they seek to balance cost with the imperatives of feeding hungry populations and averting social chaos.

Exporters in Vietnam meanwhile were setting prices at US$460 a tonne last month, the state news agency VNA said - up more than 50% from a year ago. "It's a global issue. All cereal prices are going up," said Andrew Speedy, the UN Food and Agriculture Organisation's Vietnam representative. "This is quite serious. It's hurting everybody, especially the poor." In the first two months of 2008, Vietnam's rice exports brought in US$150 million, an increase of 78% from a year ago.

Indonesia's rice production has been outpaced by its population growth for more than a decade, said Mangara Tambunan from the country's Centre for Economics and Social Studies. Last year, Indonesia imported 1.5 million tonnes. Heavily subsidised rice is also sold to millions of the poorest families, yet even those prices are rising.

In Bangladesh, which has a population of 144 million, the price of rice has doubled in a year, vastly outpacing income levels, said Ruhul Amin, deputy head of the government's food planning unit. "People are cutting all their other spending to focus only on food," Amin said, but with 40% of the population relying on a dollar a day or less, the poorest are struggling to survive.

- Like I wrote earlier in my inflation-fighting guide, for the poor, the fight against inflation can be a fight for survival. As a food group, you cannot really get more basic than rice, and you cannot substitute it easily, since it is a staple food for the billions of people in the Asian countries. I was talking about what happens if the cost of food doubles for the poor, and apparently, as you can see, it has already been happening in Bangladesh. This is bad. If inflation continues to take off, which is what I see happening, things will be getting very bad, very quickly.

India inflation crosses 5% to hit a 10-month high

This article belongs to the India inflation watch story arc.

channelnewsasia.com :

India's inflation rate crossed 5% to hit a nearly 10-month high, according to official data Friday [7 Mar 2008], dealing a blow to the government and reducing chances of an early interest rate cut. Inflation climbed to 5.02% for the week ended February 23 from 4.89% the previous week, according to the wholesale price index, India's most watched cost-of-living monitor. Inflation is still far below its two-year high of 6.69% hit in early 2007 but breached the central bank's target of close to 5% for this fiscal year ending March 31, 2008, and surprised analysts who forecast it would fall to around 4.8%.

The rise - driven by hikes in the cost of fish, vegetables, fruit, milk and other essential foods - also came as unwelcome news for the Congress-led government, which is worried about prices rising with just over a year to go before the next general elections. Reserve Bank of India governor Y.V. Reddy said the central bank would continue to focus on achieving price stability at the same time as trying to achieve its other twin goal of economic growth. Reddy added the bank was also concerned about rising global commodity and fuel costs. Falling Indian wheat and rice output is also stoking inflation. Both India and giant neighbour China have made fighting inflation a top priority. Inflation in China stood at 7.1% in January.

- As the economists and analysts continue to be surprised, inflation continues to take off globally, and it continues to upset existing economic models everywhere. One thing we can be sure of - there will be more surprises to come.

Goldman Sachs bearish on Canadian Dollar - buy CAD!!!

seekingalpha.com :

The Canadian dollar is likely to be in for some weakness amid falling interest rates and slower economic growth, but keep an eye on rising commodity prices before selling the local currency short in the near-term, strategists say. The Canadian dollar will face some downwards pressure as evidence mounts that Canada cannot decouple from the U.S. economic slowdown, Goldman Sachs said in a strategic report. The report said : As the U.S. slowdown turned more severe in the second half of 2007, and into a recession in the first half of 2008, the support from commodities became insufficient to counter increasingly large negative direct macro spillovers from the U.S.

- Goldman Sachs? That's the same bunch of guys who said to sell gold back on 29 Nov 2007 when the gold price was at $802. As of the close this past Friday, gold is now $972, up 21% since their "sell" recommendation. Conclusion? It might actually be profitable to do the exact opposite of what they say. Buy CAD!!!

(2008-03-10 00:23:14 SGT) [Biz] Permalink

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