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World rice shortage

An excellent research paper by Marina Johnson - Spring 2008

"They're taking no chances with this year's harvest on the farms in Supamburri. Alongside the heavy machinery, there's a new feature: shotguns. The message is clear: Hand off my rice." ITV News Correspondent, Inigo Gilmore ("Rising Food Prices"). This is the heart of Thailand's rice-growing region, and there's great anticipation around this season's harvest. With many countries facing shortages, rice has never been more prized, so prized, in fact, that for the first time this area has seen significant and organized thefts of the crop. For this reason local farmers are keeping a close watch on this harvest.

Food supplies have dropped so low, enough to incite riots and protests in several developing countries. Unrest tied to food prices has been reported in Cameroon, Afghanistan, Bangladesh, Indonesia and Egypt. Widespread riots in Haiti have resulted in several deaths. Those most affected in these countries are landless laborers and urban slum-dwellers who are now spending 70 percent to 80 percent of their income for food. They can't afford the increased prices ("As Food Prices").

Haiti imports 90 percent of its food. So you can imagine, if the food prices have gone up three times over the last three years, that's going to be a country that will be very affected, "Anybody who's a wage-earner and basically has the money to buy food is suddenly finding that they can no longer put two meals on the table for their family and they have to claw it back to one." Komi Kharas, Brooking Institution ("As Food Prices").

World rice consumption has increased 40 percent in the past 30 years. Annual world production had reached a record 420 million metric tons. But global supplies have fallen to their lowest level since 1983-84 (Brinkerman). Around the world, the cost of food is going up, 83 percent in the last three years, and the rise in prices is threatening to plunge more than 100 million people deeper into poverty and hunger. This food shortage is affecting the entire world but is felt the strongest in the poorest of nations even reaching into the middle class. Reasons for this epidemic are vast; some even out of human control, but there are steps we can take to once again feed the hungry.

"What started with a shortage in Thailand and a typhoon in Bangladesh is now putting tremendous pressure on domestically produced rice," Rich Lenardson, manager of Sun Food Service Brokerage in Portland, OR. "I've sold rice since 1978 and I've never seen the kind of price increases we've seen in the past month or so here" (Brinkerman).

The high cost of fuel for transporting food, bad weather in key agricultural areas of the world, the increased food demand from developed nations and market speculations are also contributing to the high prices. "It's a complex converging of events. It's a mixture of issues ranging from bad weather -- climate change plays a role. In Australia, for instance, there's a multi-year drought that has really eaten into the global food supply," Anthony Faiola, The Washington Post ("Supply").

Several reasons are cited for the problem, high energy prices, which boost cost of food transport, climate change, which causes bad harvests in areas from Africa to Australia, and increased consumption by newly prosperous China and India, which are producing less food as farmers move to the cities. Among the numerous factors contributing to the problem are record oil prices that have driven up the cost of transporting food and increased demand.

Another factor, particularly in the U.S. and the European Union, is the diversion of crops such as corn to produce ethanol and other biofuels. In the meantime, the high prices also make it harder on aid agencies to help out; all being tied to the controversy over ethanol, the diversion of corn into a biofuel, rather than for food is an ongoing debate in this country. America produces approximately 40 percent of the world's corn and we're diverting 30 percent of our production into corn-based ethanol currently. "We've got our foot on the accelerator to produce more corn-based ethanol and to accelerate this sort of connection between food and fuel." Raymond Offenheiser, Oxfam America ("As Food Prices"). These new demands from the biofuel industry are taking up more and more of the U.S. corn production, affecting wheat prices, because farmers are inclined to plant less wheat and more corn.

A statement released by, British Prime Minister, Gordon Brown's office said that delegates planned to work with the G8 and European Union to form a global strategy that would increase support to the world's poorest countries and attempt to tackle the price problem. It was also agreed that governmental approaches to biofuels should be assessed. "Prices have surged alongside rising energy and production costs, the effects of climate change, and a squeeze on land for production. Prices have spiked as African and Asian countries rushed to secure rice stocks amid fears of social unrest." Gilmore.

In India, a country where millions live a hand-to-mouth existence, concerns about securing those domestic stocks prompted the government to ban rice exports. India is traditionally one of the largest exporters of rice in the world, and this new ban is causing alarm. The Indian government hopes it will stabilize the price of rice there, but the fear is it may push up prices elsewhere. Signs show that is already happening, India's ban follows an export ban by another major exporter, Vietnam, and all this is putting pressure on Thailand, the world's only remaining major exporter.

China has almost doubled its consumption of meat, fish and dairy products since 1990. This takes a lot of grain off global markets since, for example, it takes seven pounds of grain to produce one pound of meat. This increased demand in China reached a tipping point over the past few years, with China disappearing as one of the largest grain exporters in the world into an importer of grain virtually overnight. Demand in China and India has been increasing now for a decade or more. And globally, the system was able to cope with that demand, up until just a few years ago.

An additional 100 million people, previously not requiring food assistance, are now not able to buy food, said World Food Program, WFP, executive director Josette Sheeran. "This is the new face of hunger -- the millions of people who were not in the urgent hunger category six months ago but now are" ("Global Food"). The U.N.'s World Food Program says the problem is getting worse. Food prices are going through the roof right now, which means that every day that passes we can buy less food than the day before. The U.N.'s World Food Programme was forced to tack an additional $755 million to this year's budget of $2.9 billion to account for rising prices. Oxfam America reprehensive, Raymond Offenheiser, "I think the entire humanitarian community is very concerned about the amount of money that's going to be available for food assistance over the coming year" ("As Food Prices").

The prices of rice, maize and wheat have hit record highs and have doubled in the past year. "Foods price escalation has been especially evident in recent weeks. In Asia, the price of rice has more than doubled in less than two months, from $460 a ton at the beginning of March to more than $1,000 currently," Sheeran told the BBC ("Global Food").

The cost of staples last year rose significantly. Rice was up 16 percent; wheat rose by 77 percent. This year, the spike is even more dramatic. Since January, rice prices have soared 141 percent; one variety of wheat went up 25 percent in a single day ("As Food Prices").

Due to desert conditions and dry hot weather, Mauritania, a small country in northwest Africa, is forced to import approximately 70 percent of its food supply. This is a country that's clearly dependent on the global marketplace for its food. But in a situation like they have now, where food prices have surged to, in some cases record levels, in a very short period of time, you see a situation growing where these people are simply unable to pay for their food. The food is in the markets; they just can't afford it. People who live on less than a dollar a day have to pay 70 to 80% of their income just for food. "There was a family at a marketplace in the capital of Mauritania where they were selling their last goat. They had five goats last year, but because prices have soared as they have, these people have been forced to either sell their goats or to eat them. So what they're doing at the moment is trying to hang on to what little they have. They're skipping meals. They're eating less food. They're eating poor quality food. They used to have rice puddings, for instance, that had rich milk, as well as cooking oil and sugar, and they've dwindled that down to recipes including only rice and water," Faiola ("Supply"). Presently, situation like this are quickly becoming the norm in many countries.

And as prices started to go up, many consumers decided they would be better off to buy now because prices might keep going up in the future, creating a lot of panic buying. The countries that were previously willing to sell stopped selling, reinforcing the bubble in markets. Human resources director for Sysco Food Services of Portland, Oregon, Don Haverkamp, feels, "Consumers in some instances appear to be reacting to fear of shortages by binge buying and hoarding," A sign informs customers of a purchase limit on bags of rice at a Costco:

~Due to increased demand, we are limiting rice purchases based on your prior purchasing history. Please see a supervisor to find your limit~

Analysts trace the trouble back to India, which slapped impositions on exports last year to protect domestic supplies. The ripple effect of that decision finally started to be felt in U.S. stores. "A 50-pound bag of jasmine rice that sold retail for $22 or $23 jumped to $39, $50," says Celia Chan, president of United Pacific Co. Inc., a Beaverton, Oregon wholesaler. "Some U.S. farmers, seeing the chance to increase their own profits, are now trying to capitalize by raising the prices," she said, adding, "It's really hard on the restaurant business now" (Brinkerman).

Even though the evidence is undeniable, some experts feel that the situation is causing undue panic. "I don't know why people keep asking the same question. There is plenty of rice for consumers," David Cola, USA Rice Federation, Washington D.C. "The U.S. produces 1.5 percent to 2 percent of the world's supply, and U.S. farmers grow nearly 90 percent of the rice Americans consume each year." However, Mr. Cola is failing to acknowledge the impact outside of the United States. Regardless of one's view of the situation, at the end of the day, this is not a problem of a global food shortage. This is really a problem of distribution. This is a problem of people who don't have enough money to buy food

One might ask how this could have happened. If you can draw a line from a wheat, corn or soybean farm in the American Midwest all the way to Mauritania in West Africa, one might ask: wasn't globalization supposed to make food cheaper for poor people? For the last 15 years or so, there has been this assumption that countries like Mauritania could effectively abandon their government-fixed price systems that they had and give up this idea of having to stockpile food for a rainy day, the idea being that the global marketplace would, of course, provide. As a result, when a market increases in demand, for instance, when we see rising demand from China or India, the prices are not adjusting the way they should be, because there's an inhibitor in the market. With the situation where the United State, Europe, and Japan are protecting their famers by offering government subsidies, these subsidies allow these farmers to sell their crops for less. Smaller countries that do not offer subsidies are unable to compete in the market and soon abandon their food farms to grow cash crops. As a result, less food is grown and sold while demand is getting larger every decade.

World Bank President, Robert Zoellick: "It's getting more and more difficult every day. In many developing countries, the poor spend up to 75 percent of their income on food. When prices of basic foods rise, it hits hard. Food riots have already occurred in several nations this month. At least seven people have died in violence in Haiti, where more than half the population lives on a dollar a day or less. The price of rice there has doubled since December." ("As Food Prices"). This situation is very serious, in Egypt; rioters burned a market and neighboring school. In Thailand, a country that exports 90 percent of the world's rice, farmers now carry guns to protect their crop.

World Food Program managers call this crisis a silent tsunami that threatens to plunge more than 100 million people world wide into hunger. "It's probably the toughest challenge that we are facing as and aid organization in our history," said Bettina Luescher, a New York spokeswoman for the 45-year-old agency. The WFP bought rice in Bangkok for $460 per metric ton on March 3. Five weeks later the price hit $780 (Brinkerman).

But one of the things that has happened here is that the market for food has become connected with the market for energy, because you need fertilizer to grow your crops -- most of the fertilizer is produced from natural gas. Energy is needed to transport and distribute food, the shocks that we are now seeing and the pressures in the energy market are inevitably spilling over into pressures in the food markets. As some governments are limiting their exports to protect their own populations, we have got to reinvigorate investment in agriculture and the agricultural sector in many of these countries in order to get a sustainable, a long-term solution. One of the things we may need to rethink is, how do we want to structure food? Do we want to link this market so closely to another very vulnerable market, which is energy? Or do we want to develop different forms of agriculture, which are less energy intensive?

This is not Greek tragedy where fate is decided by the gods and humans can do nothing about it. No, we have the ability to influence our futures; we can fix this problem and need to act quickly.

Works Cited

"As Food Prices Soar, U.N. Calls for International Help." The NewsHour with Jim Lehrer. PBS. WOPB, Portland. 23 April. 2008.

Brinkerman, Jonathan. "A World of Factors Boosts Rice Prices." The Oregonian 4 (2008): A1and A4.

"Global Food Prices Dubbed a 'Silent Tsunami'." The NewsHour with Jim Lehrer. PBS. WOPB, Portland. 23 April. 2008.

"Rising Food Prices Felt Around the World." The NewsHour with Jim Lehrer. PBS. WOPB, Portland. 11 April. 2008.

"Supply, Price of Food Increases Hardship for World's Poor." The NewsHour with Jim Lehrer. PBS. WOPB, Portland. 29 April. 2008.