Rice price jumps to record high after doubling since 2007

This article belongs to the Global food crisis story arc.

bloomberg.com :

Rice climbed to a record and corn traded near its highest ever on speculation a 3% annual increase in global demand for cereals will outstrip supply as governments curb exports to prevent protests. Rice, the staple food for about 3 billion people, rose 2.4% in Chicago trading today [3 Apr 2008] after doubling in the past year. Rice in Chicago climbed 42% in the first quarter, the biggest such increase in at least 14 years. Rough rice for May delivery advanced to $20.26 per 100 pounds on the Chicago Board of Trade as the United Nations' Food and Agriculture Organization said global exports will drop 3.5% this year as nations curb sales.

The World Bank estimates "that 33 countries around the world face potential social unrest because of the acute hike in food and energy prices," Robert Zoellick, the bank's president, said on the organization's Web site. For these countries "there is no margin for survival," he said. Record grain prices contributed to strikes in Argentina, riots in Ivory Coast and a crackdown on illicit exports in Pakistan. The world's poor "are living very close to the edge as it is," said Robert Zeigler, director-general of the International Rice Research Institute in the Philippines. "If they are pushed further, they are typically the first who will spark unrest." The United Nations warned in February that 36 countries, including China, face food emergencies this year, as stockpiles of grains such as rice drop to a 26-year low.

- If this sorry situation sounds familiar to the peakoiler community, that's because we are seeing the exact same trends playing out in the food arena, if we were to compare them with the notes we have been keeping on the oil industry : demand is rising while supply is falling. Exporters are reducing their exports as they decide that the needs of their own people come first, ahead of earning foreign exchange by exporting to consuming nations. Inventory levels are falling, and there is little or no spare capacity in the system. Any disruption to supply, even a small one, sends prices spiking. Very familiar territory indeed.

Looking at a longer-term chart, this time a historical rice price chart from CBOT [Chicago Board of Trade] as above, you will notice how the price has gone up exponentially since the beginning of 2007. The graph is denominated in US cents per 100 pounds, so you divide by 100 to get it in terms of US dollars. So we see that the price of rice has doubled from $10 in 2007 to well over $20 at the beginning of 2008. If we look back a bit further, we note that the price was $4 back in 2002. That's a five-fold increase in 6 years.

Now let's consider that half the world's population [3 billion people] depend on rice as a staple food, and that the poorest of them spend 60-70% of their total income on food. What happens when the price of their food, particularly rice, were to double, triple or even, as we have seen, quintuple in just a few years, while their income remains basically stagnant? We'd have protests, and we'd have riots, which we have seen taking place. Next, what happens if more and more people were to join the protests against food price inflation? I think we're going to have political and social chaos. And that's the stuff of major political and social upheavals. We're sliding down the slippery slope very quickly. Like I usually say, I think we're going exponential.

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