Rising Rice Prices Outpacing Government Controls

While prices of wheat, corn and other agricultural commodities have surged since late 2006, the increase in rice prices began only in January.

Still, the climb began well before prices jumped 30 percent to an all-time high after Egypt announced a ban on selling rice abroad in order to keep local prices affordable, and the Philippines announced plans for a major rice purchase in the international market in order to boost supplies.

Rice prices have doubled since January, when the grain traded at about $380 a ton, boosted by strong Asian, Middle Eastern and African demand, with recent quotes of as much as $760 a tonne.

"I have no idea how importing countries will get rice,” Thai Rice Exporters Association president Chookiat Ophaswongse told the Financial Times. He expects prices will rise further.

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Global rice stocks are at their lowest since 1976, adding to fears of fresh outbreaks of social unrest across Asia, where rice is a staple food for more than 2.5 billion people.

The Egyptian ban follows similar restrictions imposed by Vietnam and India, the world’s second and third largest rice exporters. Cambodia has also announced an export ban.

The Indian government is trying to rein in local inflation by imposing restrictions on exporting rice, a move Indian traders fear will halt all non-basmati Indian rice sales.

India’s control measures include a 53 percent hike in the minimum price for selling non-basmati rice abroad, to $1,000 a tonne.

Analysts say that exports of premium basmati rice will likely continue, although the volume of premium basmati exports will probably drop because of minimum export price increases and reduced export tax incentives.

The Philippines — the world’s largest rice buyer — wants to purchase 500,000 tonnes after failing to purchase a similar amount earlier this month in a struggle to cover a production shortfall.

Combined, foreign sales restrictions have removed about a third of the rice traded in the international market.

Rice is also a staple in Africa, particularly for small countries such as Cameroon, Burkina Faso, and Senegal that have already suffered social unrest because of high food prices.

Indonesian officials have expressed concerns that surging food prices might lead to social unrest similar to that which brought down Suharto as president 10 years ago.

"In 1965 we faced a very, very depressing situation of social unrest,” a senior Indonesian government official says. "In 1998 we had a similar situation, and we hope in 2008 it’s not another situation like that because the cost to the economy is too high.”

China plans to increase prices paid to farmers for rice and wheat by up to 10 percent to encourage increased output and cool surging inflation that fueled retail price jumps of 23.3 percent last month.

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