Global food crisis looms as Asia's rice bowl empties and world price soars

The crisis over rice showed no signs of easing as the price of the world's benchmark jumped 10% in just one week, fanning fears that millions across Asia will struggle to afford their staple food. In a clear sign of the strain on output after major exporters began to curb exports earlier this year, a tender from the Philippines, the world's top importer, attracted offers to sell only about two-thirds of the half a million tonnes it sought. "There's been a popular misconception that the world can produce as much food as it likes. Well, it obviously can't. And Asia can't feed itself at the moment," Gerry Lawson, the chairman of Sunrice, a major Australian rice producer, said.

Increased food demand from rapidly developing countries, such as China and India, the use of biofuels, high oil prices, global stocks at 25-year lows and market speculation are all blamed for pushing prices of staples such as rice to record highs around the globe. The unprecedented surge, which some analysts said is going to continue, posed a growing threat to regional governments worried about the prospect of hoarding and social unrest. Soaring rice prices have come as fears about tight world supplies led governments to hoard and ignited protests in places like Haiti, where five died in food riots last week.

- It started as a general food price inflation, turned into an emerging rice crisis in Asia, and quickly went on to morph into a major global food crisis, all in the space of - get this - about two weeks. Some peakoilers like Sharon Astyk are already talking about a fast crash. Moderate peakoilers like myself are getting nervous. The doomers are screeching. The news items from all over the world are pouring in almost faster than my RSS reader can keep up. Here's a quick round-up of the past week or so :

a. Philippines seeks wheat supplies after China rebuff

The Philippines said China turned down a request to supply wheat, adding to concern that the world faces a worsening shortage of staple foods that has already driven grain prices to records. The rebuff follows a struggle this year by the Philippines to secure supplies of rice, of which it is the largest importer. Wheat has more than doubled in the last year to a record and rice is up 94%, triggering riots from Egypt to the Ivory Coast.

- It was mentioned that after being rebuffed by China, the Philippines would turn to the US for help to procure rice and wheat supplies. What followed was this ...

b. Philippine rice tender falls short as prices surge

The Philippines, the world's biggest rice importer, received offers for just two-thirds of the grain that it sought at a government tender today [17 Apr 2008], stoking concern about a food shortage amid record prices. Suppliers offered 325,750 metric tons compared with the 500,000 tons tendered for. Prices were more than 40% higher than the last tender in March. Another 500,000 ton rice tender has already been scheduled for May. That round of purchasing may be increased by 100,000 tons to 600,000 tons.

c. China hikes tariffs to stem fertilizer exports

China slapped massive tariffs on fertilizer exports on Thursday [17 Apr 2008] in a bid to control rapidly rising domestic agricultural costs and inflation, and above all to ensure it grows enough grain to feed its 1.3 billion people. Beijing's 100 percent-plus tariffs on some fertilizer exports may drive up prices in world markets that depend on China's supplies, fuelling rather than cooling global food costs.

- Biofuels have been a major contributing factor in all this. Talking about turning food into fuel, check out what the Brazilians are doing :

d. Brazil region to turn record 58% of sugar-cane crop into ethanol

Sugar mills in Brazil's major producing region will turn a record 58% of this year's cane crop into ethanol as surging oil prices boost demand for alternative fuels. Ethanol production in Brazil's Center-South, which accounts for more than 80% of the nation's output, will rise to 24.3 billion liters (6.4 billion gallons) this year. Last year, 56% of the crop was processed into fuel, up from 51% in 2006.

- They might as well aim for 100% [dry peakoiler humour]. Back to rice :

e. Rice traders hit by panic as prices surge

Traders and analysts warned that rice demand was escalating in spite of prices rising to three times the level of a year ago as countries try to build up stocks. Vichai Sriprasert, president of Riceland International, a leading rice exporter in Bangkok said, "It is panic. My customers are demanding double the usual volume. We would not have enough supplies for all the demand we are facing."

f. As Australia dries, a global shortage of rice

The Deniliquin [,Australia] mill, the largest rice mill in the Southern Hemisphere, once processed enough grain to satisfy the daily needs of 20 million people. But six long years of drought have taken a toll, reducing Australia's rice crop by 98% and leading to the mothballing of the mill last December [2007]. Ten thousand miles separate the mill's hushed rows of oversized silos and sheds - now empty - from the riotous streets of Port-au-Prince, Haiti, but a widening global crisis unites them. The collapse of Australia's rice production is one of several factors contributing to a doubling of rice prices in the last three months.

- Australia is one place where the issues of peak oil, global warming, the global food crisis and water shortage are intersecting. Before this, I wasn't even aware that Australia grew rice, only to now find out that production has gone down 98% - a total collapse. And now how about this one - we have news that the whole of Japan has run out of butter!

g. Japan's hunger becomes a dire warning for other nations

Japan's acute butter shortage, which has confounded bakeries, restaurants and now families across the country, is the latest unforeseen result of the global agricultural commodities crisis. A sharp increase in the cost of imported cattle feed and a decline in milk imports, both of which are typically provided in large part by Australia, have prevented dairy farmers from keeping pace with demand. While soaring food prices have triggered rioting among the starving millions of the third world, in wealthy Japan they have forced a pampered population to contemplate the shocking possibility of a long-term - perhaps permanent - reduction in the quality and quantity of its food.

How about that. An entire country, and a pretty wealthy one at that, running out of butter, something that people have almost taken for granted. It tends to kind of shake the arguments of those who have been saying that with enough money, you could buy anything. You know, like those economists who have been saying for years that rising prices would magically bring additional oil to the market? That has become a peakoiler joke, and I'm afraid that we are going to let the rest of the world in on the joke. The truth is, if there is a real supply shortage, you could throw an infinite amount of money at it, and all that happens is that prices rise toward infinity, and still nothing might come forth. If the supply simply does not exist, it simply does not exist. That's it.

- And here's the kicker to top it all off :

h. Drought hits millions in Thai rice region

More than 10 million people in parts of Thailand's rice bowl region have been hit by drought, the government said on Monday [21 Apr 2008], causing further concerns as prices of the staple grain soar. 55 of the kingdom's 76 provinces are struggling with drought, mostly in the central, north and northeastern regions. More than 151,000 rai (60,000 acres) of farmland has been affected, including half of the key central rice growing provinces.

- Thailand is the Saudi Arabia of rice. This is like telling us that half of Saudi Arabia's oil wells are going to shut down.