Monday, 21 April 2008!
HandWritten on; 22:04
YO PEEPS!!!!!!
bet you all heard about the rising food prices, especially necessites like rice. here's an article about it .. it's damn long, so i chose excerpts. scroll down for short review.
Brian McCartan
31 March 2008
The region takes a battering as agflation hits its staple food
Although Asia’s farmers and exporters ought to be laughing all the way to the bank over the rapidly increasing price of rice, they aren’t.
All sides – producers and consumers – are suffering and governments are struggling to cope, and farmers in Thailand, the Philippines and other countries are guarding their fields at night to prevent theft.The price increases have forced rice-exporting countries to put the brakes on exports to keep domestic prices down and curb inflation. The rising price of rice is part of a global trend in rising food costs, with wheat leading the way, up more than 180 percent on the year, soybeans up 82 percent, soybean meal up 67 percent. But it is rice, with its fundamental place on the plates of Asia’s consumers, that is worrying governments. A year ago, rice was trading on the Chicago Board of Trade at $10.08. It has gone up to $20.175.
Higher fuel costs, with crude soaring above US$100 a barrel and threatening to stay that way, have partly been blamed for making fertilizer more expensive, raising the cost of growing rice as well as increasing transport costs. In Southeast Asia, disease, pests and a 45-day unprecedented cold snap from China down all the way to Vietnam in January and February that hurt harvests has also been blamed. Flooding in the Philippines and Vietnam has also contributed to the growing crisis.
Part of the problem, however, has been caused by ill-advised government programs. Economically disastrous subsidized biofuel programs intended to ease global warming in the United States and Europe have caused a precipitous decline in the amount of agricultural lands planted for other food sources such as wheat and soybeans. Some 16 percent of US agricultural land formerly planted in soybeans and wheat is now being planted in corn, according to the US Department of Agriculture, most of it being used for biofuels. More corn – 86.7 million acres (35 million hectares) in 2008 – is being grown in the US today than at any time since World War II ended 63 years ago. A full 600,000 acres (242,800 hectares) more are in corn now now than in 2007. Given the heavy energy inputs that go into biofuel production, the Union of Concerned Scientists has warned that the production of the fuel itself, ethanol, may not help lessen climate change after all.
Vietnam reduced its rice exports by almost a quarter last week, ordering authorities to not sign any more rice export contracts and capping exports at 3.5 million tonnes for this year, down from 4.5 million in 2007. Prime Minister Nguyen Tan Dung was quoted in a government statement as saying the cut was to stabilize prices and curb inflation. Consumer prices rose by 20 percent in Vietnam in March, the highest in 12 years, with rice prices rising by 26 percent so far this year.
On the same day as Vietnam's announcement, India raised the minimum sale price of rice exports by more than 50 percent. The move effectively ended overseas rice sales except for only the highest grades of rice. Tax incentives for non-basmati rice exporters were also scrapped. The move is also seen as an attempt to keep domestic prices down and combat inflation. India's wholesale price inflation rose to a near 14-month high amid a slowdown in economic growth.
Cambodia, suffering from spiraling costs, also announced a two-month ban on rice exports last week. Prime Minister Hun Sen said on 26 March, "It's a temporary measure. But it is to ensure food security." In a country where a third of the population lives on less than US 50¢ a day, Cambodians are hurting from a doubling in the cost of cooking gas and a rise in the price of most staple goods.
Indonesia, traditionally a rice importing nation, is also reportedly considering a ban on exports to secure its domestic stocks. Although Indonesia expects a bumper crop this year, the increased output combined with a decline in domestic prices has r
Rising rice prices have governments worried about domestic supplies as farmers become increasingly interested in selling to the export market in order to make larger profits. Governments fear not having enough rice for local consumption and having to spend more on imports driving the price of rice up. Domestically it means that farmers are forced to sell at artificially low rates because they are denied export markets for their crop.
Vietnamese rice harvests were down this year due to a cold snap in January and February in the north of the country that destroyed 100,000 hectares. The crop was also hit by the tungro virus and an infestation of the brown planthopper insect. Despite the bad harvest, Vietnam exported 859,000 tonnes of rice in the first three months of this year, which represents a 5.3 percent increase over last year. Expecting further price increases, Vietnam's farmers and exporters have been stockpiling the grain, thus contributing to reduced supplies on the domestic market and raising prices at home.
Thailand is trying to keep domestic prices down through government distribution from its own stocks. Thailand's Commerce Minister announced that 300,000 tonnes of white rice stocks will be given through bidding to millers this week in an attempt to limit an increase in domestic prices. The rice is from a 2.1 million-tonne stockpile from the 2004-2006 harvests. Rice from the program will be sold 40 percent lower than the current price. Bids from millers will be accepted only if they pack the rice in 5 kilogram bags for the domestic market. Thailand's government stockpile is estimated to be good for only three months, then it will have to buy on the local market to replenish stocks.
The volatile rice prices have not been a boon to exporters. The common practice is for rice exporters to sell forward at fixed prices and then buy rice on the common market to meet orders. This has resulted in problems across the region as rapidly rising prices leave exporters losing money due to having to buy rice at prices that are much higher than what their export contracts were agreed for when signed several months ago. Exporters who insist on the previous price are finding it difficult to source enough rice to meet orders, forcing delays or even defaults on orders. ----> price ceiling?
FACTORS OF DECREASE IN RICE SUPPLY -
1. Land diverted for growth of biofuels - related back to our syllabus, this means that biofuel crops and rice/etc crops are IN COMPETITIVE SUPPLY! hence, increase in quantity supplied of biofuels results in decrease in q-s for rice crops. once again linked back to profit maximisation ideal of suppliers.
2. - in singapore, many people hoard supplies as they expect prices to increase/supply to drop. this is actually bad!!! because the surge in demand exerting upward pressure on price, hence prices will go up even further.
-Kyna.
Labels: econs
