Rice Shortages? Or Not?

[Hannah Bell]

For the last few months we've been hearing about food crises around the globe, and in the last few days, about "rationing" & "shortages" in the US.

We're told the shortages are due to "bad harvests," "ethanol production," "increased demand from the developing economies of China & India," & of course, the increasing price of oil.

Global warming, overpopulation & desertification are sometimes brought in to explain why rice (& other food commodity prices) suddenly spiked since 9/07 - nearly doubling, in some cases. (check the rice futures chart):

http://ki-media.blogspot.com/2007/12/rice-prices-are-steaming-with-many.html



So how bad is this rice shortage? Here are the production figures:

FAO global rice production stats as of 4/18

2005/06: 418.1 million tons
2006/07: 420.6 million tons

http://www.fas.usda.gov/psdonline/psdgetreport.aspx?hidReportRetrievalName=BVS&hidReportRetrievalID=425&hidReportRetrievalTemplateID=2


OK, so what about the bad harvests in Asia & increasing demand from China & India?

China 05/06: 126.4 million tons
China 06/07: 127.8 million tons (up 1.1%)

India 05/06: 91.8 million tons
India 06/07: 93.4 million tons (up 1.7%)

China & India are among the top 5 rice exporters, BTW. They produce enough for their domestic demand, with some left to export.

The top 2 rice exporters are Thailand & Vietnam. They supply 50% of exports. How'd they do in '07?

Thailand 05/06: 18.2 million tons
Thailand 06/07: 18.3 million tons

Vietnamese production, though not included on this chart, was also up.

Where's the biggest drop between 06 & 07?

Not in China, not in India, the countries who supposedly are growing their incomes & demand: they're basically self-sufficient. India was planning to export millions of tons until the prices spiked; they restricted exports, not because they had no surplus, but to protect their domestic market from speculation - as did Vietnam.

http://www.livemint.com/2007/06/13013936/FAO-sees-rice-exports-at-44mt.html

http://www.speroforum.com/site/article.asp?id=14900

The pullback in rice exports from big exporters like Vietnam & India came AFTER the quick rise in futures prices starting 9/07 - in effect, creating tightness in export markets where none previously existed.

So was there any big decline in rice production?

The biggest drop was right here in the US, & it wasn't because of bad harvests: it was because rice farmers planted less, & they planted less because world prices were too low to make it profitable to plant more:

US 2005/06: 7.1 million tons
US 2006/07: 6.2 million tons (-12.6%, or .9 million tons)

http://www.fas.usda.gov/psdonline/psdgetreport.aspx?hidReportRetrievalName=BVS&hidReportRetrievalID=893&hidReportRetrievalTemplateID=1


http://www.aragriculture.org/agfoodpolicy/radio/may2007/042_05082007_audio.htm (US)

"2007 U.S. Rice Planting Intentions: USDA estimates that U.S. all rice producers intend to plant 2.64 million acres, 7 percent below 2006 and 22 percent below 2005...this would be the lowest U.S. planted rice acreage since 1987...due to the added cost of production, lack of adequate pricing opportunities, other crop alternatives...On lack of pricing opportunities rice prices never reached or stayed at a level sufficient to encourage additional planted acreage."

So on the whole, this is what the picture looks like to me: there was some tightness in the rice export market, but it's fueled mainly by the drop in US (one of the top 5 exporters) production.

But the tightness was no greater than in previous years. In fact, the forecasted gap between supply & consumption was actually less than in any of the previous 5 years: see chart: "Global Consumption Continues to Outpace Demand":

http://www.fas.usda.gov/grain/circular/2006/05-06/Rice%2005-06.pdf

However, once big exporters halt exports, it leaves importers scrambling for supply, putting further pressure on prices & inducing hoarding by buyers & sellers alike.

Why did exporters reduce exports? To protect their home markets in the face of international price spikes. Why the price spikes in rice futures, starting in September of 2007? The supply/demand picture at the time doesn't seem to justify it.

I'll return to this question, as well as to the question of declines in stores - another supposed cause of present shortages, in another post.

[NightWatcher]

1. shortage vs. panic?

I think that people are starting to panic, fearing that something may happen to disrupt the transportation chain from the truckers who are overpaying on diesel to the stores where we buy the stuff. When the trucks stop running, we stop eating.

[icymist]

2. I saw pallets and pallets of rice in a nearby grocery store yesterday.

I even bought 25#s of Jasmine rice for $12. Don't see any shortage here.

[OmmmSweetOmmm]

14. I saw large bags of long grain at my local A&P yesterday at $4+ a bag.

Must have been 10 lbs. BTW..I love jasmine rice. :)

[BobTheSubgenius]

15. That's my choice, too.

I just bought a 10kg bag for $9.99, not an hour ago.

On edit: I meant jasmine rice. Long grain is OK, but it's no jasmine. :D

Basmati is excellent, but not so much better than jasmine to justify the price hike.

[DJ13]

3. Sounds like stockpiling to manipulate the contract price on the futures market

Kinda like someone is using the same template for manipulating high prices that the oil industry has been using.

[Warpy]

4. Shortages? Not really. Price hikes? You betcha.

Artificial shortage caused by large scale hoarding? Again, you betcha.

[ironrooster]

5. good catch.

This is why globalization will fail. It runs headlong into finite resources(real or imagined). Now in this case - they might not be so finite - but if that impression exists, countries will always take care of their own first.

[Deja Q]

13. Seconded, except

"countries will always take care of their own first."

America is currently building other nations. With all the dreadful news out there, why isn't America taking care of its own? That's what it seems like, at least in terms of jobs and vet benefits being cut... I can't exactly argue the rebate is pointless...

[lapfog_1]

6. You need to check out more current info...

http://news.usti.net/home/news/cn/?/world.asia.india/2/wed/ck/Uindia-rice.R6YM_IA1.html

http://www.iht.com/articles/ap/2008/03/26/business/AS-FIN-Cambodia-Rice-Exports.php

http://www.plenglish.com/article.asp?ID=%7B384E3073-0C8C-4609-A7A7-67975B0A13C4%7D)&language=EN

http://goliath.ecnext.com/coms2/gi_0199-6117132/PAKISTAN-HALTS-RICE-EXPORTS-TO.html

http://in.reuters.com/article/domesticNews/idINSP899820080418

So... something is going on. Emergence of OREC?

[Hannah Bell]

7. The FaO & FaS stats are the most recent, april 08 estimates.

Your links say producers are limiting exports. I've already noted that producers are limiting exports - not because of shortfalls in their rice production, but to protect their home markets from the speculative crisis. The exporting countries have plenty of rice.

[lapfog_1]

8. Like I said, it's the beginning of OREC.

Organization of Rice Exporting Countries.

But the rice shortage is real for the rest of the world. No matter what the production numbers are.

[Hannah Bell]

10. Futures prices spiked in September 07. Exports were reduced

months later. The price spikes weren't caused by withholding supply. Supply was withheld (kept off the international markets) to hold down prices in the exporters' home markets.

Additionally, there were similar spikes in all basic grains at about the same time - with similar underlying fundamentals. Those spikes weren't caused by any incipient "OREC".

[Tashca]

9. Been watching carefully

I've been watching this carefully trying not to jump to conclusions.
Looking at your charts I see the world carryover on rice has been falling from year to year. The carryover stocks on many of the grain commodities here in the U.S. are trending down and some to decades lows. This is supposedly what traders are basing their buying on. I am not a trader by any means. But the carryover stocks do concern me some.

I do know when someone says shortage....that can be a self fulfilling prophecy. I really have no idea about rice......but I know the bins are full of corn and soybeans around here....rumors of higher prices and the selling slows down....like I said....a self fulfilling prophecy.

[Hannah Bell]

12. Yes, there's been a decline in stocks. If you look at the link, you

find that this year's decline is small in comparison with earlier years, & all of it in China; the rest of the world increased stocks slightly.

The other thing you have to ask is WHY stocks have been declining. It's not the case that production is fueled by abstract demand for rice. In a monetized market, it's fueled by profit opportunity & price. US farmers cut back their production last year to the tune of a million tons, & had cut back the year before that as well - because of low prices, not because of inability to produce. Other factors that affect stocks:

1. Free trade agreements: By the terms of these agreements, price supports for agriculture have been repeatedly cut back. Cutbacks in support typically result in lower production.

a. Nations have been pressured into lowering their stores; for example, India sold off a lot of its wheat stores at below market price. If you sell in poor countries below market, or to aid agencies below market, you shift the demand curve - &, incidentally, drive domestic producers out of business with your cheap grain.

2. If you browse agriculture cites (e.g. USDA), you'll find them projecting drops in stores years back, with no apparent sense of panic - even while they're talking about cutting back acreage because of low prices.

Grain production is highly managed. High stores = low prices, low stores = high prices.

I don't think the reduction in stores is due to inability to produce, but is the deliberate pattern since the Reagan era.

[Tashca]

18. Your right.

I didn't read the graph correctly.....the China situation was the reason. That makes sense.

Putting on my tin foil hat...:tinfoilhat:

There are a couple of things I am seeing mentioned over and over.
1) Constant mention of corn being made into Ethanol. They never say that this is causing all the problems, but continuously mention it. I can see how that may be a problem in the near future, but I don't see how that impacts yet. I see it as a deliberate attempt to undermine the production....maybe for the good...I don't know.
2) I have seen a real push for GMO crops as being the saviour of food production problems. It may not be direct, but it is implied.
I know several right-wing think tanks are heavily funded by Big Oil and GMO companies....this theme sounds so familiar. Knock out ethanol and increase GMO usage and acceptance.

The other thing that has been bothering me about this. These high prices WILL increase acres brought into crop production. I know there is a massive campaign going on in the U.S. to take conservation acres off the Government roles and put them back into production. I suspect this is going on all over the world. I don't care what people say.....one thing multinational grain companies love is low price commodities....the lower the price the more they move. They get paid by moving quantity not quality.

Then on the other hand.............this may be all real. Not sure I'm ready to accept that quite yet.

[FormerOstrich]

21. I wish it was a tin-foil thought....

but I strongly believe it is not. I, too, have noticed a lot of "press" saying GMO may be the answer.

What I haven't seen getting a lot of "press" is how GMO is probably a lot of the problem. I need to read this thread a bit more carefully to see if any of the links provide any correlation between the US Rice contamination and the Rice supply decline.

For those that may not remember US Rice is contaminated. Not only that, FDA was planning on approving planting of a variety with a human gene...

...so hard to keep up on all the atrocities but here is a google link for some frightening reading...

http://www.google.com/search?hl=en&q=us+genetically+modified+rice+contaminated

[catnhatnh]

11. K&R

There have been nearly a dozen posts about rationing,shortages, and limits on sales in the US...I checked out the stories and it comes down to this-in some areas superstores are limiting sales to 4 bags of rice...but they sell 50lb bags of rice-so the "limit" is about what two people could eat in 10 months if one meal a day was a main dish rice meal, and they are welcome to buy another 10 months worth the next day...In short the plan is to prevent morons from buying a two year supply of rice that they most likely won't eat...because they are buying it for some supposed security,not food.

[uppityperson]

16. k&r with thanks.

now, about those missing penises///

[entanglement]

17. Recommended. In a highly speculative market, perceived shortages can be as bad as real ones.

Of course, the speculators and finance parasites are running uncontrolled right now while working people suffer.

[Orwellian_Ghost]

19. Everyone needs to read your post

I repeat EVERYONE needs to read this as if their life depended on it.

There is no food shortage.

This IS NOT an issue of overpopulation.

This is a matter of the very natural and predatory techniques of capitalism.

The primary culprit is THE MARKET with the foremost technique that is used to create this crisis being that of DEREGULATION.

K&R

[Hannah Bell]

20. Yep, capital loves dereg because they arbitrage the highs & lows.

Too bad people have to die for their profits.

[Hannah Bell]

22. kicking my own post

[Hannah Bell]

23. am kick

[frickaline]

24. nice work, recommended

[Orwellian_Ghost]

25. Kicking

[uppityperson]

26. Media hysteria (Breaking News! but watch our ads first) or not?