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. (click on 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

"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.

[truedelphi]

1. Let them eat millet! n/t

[Birthmark]

2. Thanks for the info.

It's the first solid figures I've seen. Interesting that the media hasn't done the research that you have, much less reported on it.

[Hannah Bell]

4. Isn't it? I thought that's why they got the big bucks. Why am I doing their job

for free?

Crap, I think this is worth at least a bit of what Couric gets for her pretty teeth.

[Birthmark]

5. Maybe you need to work on your "perky?"

I'm perky challenged myself, so I know your pain if that's the case. :)

[Hannah Bell]

6. Perky challenged here, too. Who needs facts when you have

dental veneers?

[Birthmark]

7. Ain't that the truth! lol

[Parche]

3. No Shortage Of Ignorance Here

:woohoo: :hi:

[FirstLight]

8. While I agree that speculation in the food market is the main reason for this BS,

I think that there is the possibility to consider that the problem may NOT be about production...but distribution.?

If the rice is not getting to these countries, and speculations are helping the price go up & up... then is there a million or more pounds of rice rotting somewhere? THAT is the question... if production is fine, and people are starving, who is controlling this madness?

edit to add: I am still buying a little extra here & there :scared:

[Warpy]

9. The problem is that prices started to go up about 6 months ago

as fuel increases were felt in the food supply. Even in countries like China where it's all human and animal power at the growing level, they still have to polish and ship it and that takes fuel.

First people started to hoard what they could and distributors started to hoard what they could and now there's a shortage because so much is being hoarded!

They're jailing hoarders in the Philippines, meaning there's at least one country out there that has identified the real problem with supply.

[sbyte]

10. Some hoarding, fueled by a lot of speculation

The futures market seems to have push up the price starting in aug 2007.
from $10/mt to $24/mt now.

http://charts3.barchart.com/chart.asp?jav=adv&vol=Y&grid=Y&divd=Y&org=stk&sym=RRK8&data=H&code=BSTK&evnt=adv

Maybe the speculators on the futures market are part of the problem also.

As the price goes up producing nations hold back. The markets for the exchange of rice have seized up. Export nations are pulling out of the WTO. The distribution will go on, but thru private deals directly thru suppler and selling brokers.

[Warpy]

14. Futures speculation encourages hoarding at the distribution level

but if futures are bid up and hoarding doesn't occur, then the bid holders take a bath when prices don't keep going up and the commodity sells for far less than what they bid on it.

Hoarding is happening now because the price of oil is driving everything and we all know prices will continue to escalate.

We're in a vicious cycle now, with hoarding increasing prices as artificial scarcity is created and that scarcity driving prices and speculation.

[Mojorabbit]

15. The prices continue to go up though

My BIL works in food distribution for bakeries and the bakers are freaking over the cost of flour. He is freaking over the price of wheat and the price of fuel to ship it. Diesel for the trucks has gone thru the roof.

[newfie11]

11. no rice shortages here in western Nebraska

I wonder how much the increase of food prices has to do with trucking and the price of diesel

[leftofthedial]

12. capitalism is killing us all

[whatchamacallit]

13. Interesting...

Thanks:hi:

[TalkingDog]

16. World Population

2005 = 6,453,628,000

2008 = 6,663,493,392

.97% increase

I'd say we're holding steady.

(self-grammar nazification)