Fragile rice

Speculation and panic buying has tripled the price of rice and thrown the Third World's most important foodstuff into crisis.

Hoarding a Third World staple

A Filipino teen carries bags of government-distributed U.S. rice in Manila. ((Bullit Marquez/Associated Press))

It is no exaggeration to say that rice is probably the most important commodity on our planet.

As food, it dominates the diet of roughly half the world's population, most of them poor.

As an economic activity, rice production provides work for hundreds of millions — again, most of them trying to claw their way out of subsistence living — according to United Nations estimates. That includes farming, processing the raw grain, transportation, wholesale trading and selling in the marketplace.

But since January 2008, a frenzy of speculation and panic buying has tripled the benchmark price of rice on world markets to around a $1,000 US a tonne and for the world's poor this has shoved a huge wrench into an already fragile existence.

Stockpiles have plunged in countries already dependent on imports. Exporting nations have slapped restrictions on rice trading. In the Philippines, Haiti and several West African countries, consumers have rioted in frustration.

The blow to rice stocks is a central part of what Josette Sheeran, the head of the UN's World Food Program, has called a "silent tsunami" devastating the world's poor.   What lies behind this perfect storm in the global rice market? How did a commodity so crucial to the lives of billions became so expensive so quickly, raising the threat of food shortages, civil unrest and starvation?

Too many mouths

Classic economics provides part of the answer to today's crisis. Basically, the world isn't growing enough rice. Demand has soared but supplies are at a 50-year low. That is a formula for rising prices if ever there was one.

Duncan Macintosh of the International Rice Research Institute (IRRI) in the Philippines says the crisis has been developing for years but hardly anyone was paying attention.

Dr. Kent McKenzie, director of the Rice Experiment Station near Biggs, Calif., inspects a variety of long-grain rice for export to Japan. ((Rich Pedroncelli/Associated Press))

Even as demand was increasing, land was being taken out of rice production, he says. "People got into vegetables, export crops and, of course, biofuels."

Cities expanded into agricultural hinterlands and the available water for a crop that needs nearly 3,000 litres to grow a single kilogram of edible grain became siphoned off for other purposes.

Add to this the fact that a onslaught of drought and devastating typhoons destroyed millions of hectares of productive paddy. And that the red-hot economic growth in India and China has been fueling demand for the most expensive basmati and jasmine strains.

Africa became a big rice importer. Latin Americans consumed more arroz with their pollo. Population growth meant more mouths to feed everywhere and rice was often the grain of choice.

"You have an industry that's feeding half the world and it takes catastrophic increases like these to make people pay attention," Macintosh says.

Then there is globalization

Many laud freer, more efficient world trade as a net benefit to the poor and that may be so. But free trade in rice has worsened hunger and poverty in countries like Haiti and exacerbated problems in big importing countries like the Philippines.

Haiti, the poorest country in the western hemisphere, was once self-sufficient in local strains of homegrown rice. But in 1986, the International Monetary Fund forced Haiti's new government to stop protecting local rice farmers from global trade.

As a result, cheaper rice grown by heavily subsidized U.S. farmers flooded the market. Within a few years, Haitian paddies lay dusty and fallow. The country grew practically no rice and so became especially vulnerable to international price swings.

Rice prices really began to soar in March 2008 when exporting countries placed restrictions on oversea sales. India led the way, banning all rice exports except for high-end basmati. Even Thailand, the world's largest exporter, stopped selling its rice for a while amid fears of civil unrest as local food prices rose.

Stopping exports meant that governments in rice exporting countries could buy up rice crops and flood their domestic markets, driving down prices and easing the burden on their consumers.

Those export restrictions produced panic in the global markets and attracted speculators. Futures contracts for rice skyrocketed, pulling the price for consumers up with them.

Hoarding and black marketeering also played a role. Pakistan sent its army to guard rice stockpiles in parts of the country. The Philippines set up a paramilitary task force to raid rice warehouses and put speculators and hoarders in jail.

Volatility to continue

Some temporary relief may be in sight though, experts are saying, though the world stockpile of rice is the lowest it has been in many decades.

Experts like Macintosh at the rice institute say early reports from the Asian rice harvest in April and May is probably easing fears of shortage in the big rice-consuming countries.

"As I look out my window here at the Institute [in Los Banos, the Philippines] I see people picking rice," Macintosh says. "By all accounts, barring storms, we've got a good crop."

With an Olympic Games to host, China, almost alone among the big exporters, has pledged to continue international rice exports and is injecting a whopping $80 billion into its farm economy to help with rice and other food production.

Thailand has lifted its export ban, hoping to flood overheated markets.

But don't expect sharply lower prices just yet. Most economists forecast that rice will remain well above $500 US a tonne for the foreseeable future. They also warn that markets will remain volatile as the root causes of the current situation remain largely unaddressed and the commodity still dependent on weather and other uncertainties.

For example, Cyclone Nargis, which killed thousands when it hit Burma on May 4, has also devastated that country's rice stocks, prompting panic buying in neighbouring countries as a big international food aid effort gets under way.

For Macintosh and the IRRI, it all means taking a series of urgent steps to avoid another rice crisis. Among them: Find new strains to improve yields and withstand drought; and invest more in irrigation and water conservation.

But the "most complex challenge," according to Macintosh, is for governments and global agencies to take a hard look at how rice is grown, marketed and priced.

Farmers need to be able to both produce more and earn more, he says, so the world's poor can move beyond subsistence to a stable diet for generations to come.

"Look," he says, "everyone agrees that crude oil production is hugely important, but no one starves if we use less oil. This is food we're talking about, and we can't do without it."