From Wal-Mart quotas to a 'frenzy' in Vancouver, Asia's rice crisis goes global
From Thursday's Globe and Mail
April 24, 2008 at 3:25 AM EDT
Vancouver's Western Rice Mills Ltd. has been importing rice from Thailand for years and sending it to grocery stores and restaurants across Canada. But yesterday the Thai shipments stopped, leaving the company scrambling to find supplies.
"We've never seen anything like this in the history of this company," said Lawry Poupart, controller at the company, which supplies major chains including Safeway and Save-On-Foods. "Everybody is precariously watching what's happening in the world."
Rice has been hit by a convergence of factors recently, including increased demand from developing countries and weakened supplies due to poor crop yields, rising input costs and limited growing areas. World rice stocks are at 20-year lows and riots have broken out in some countries where rice is a staple. While global rice production is expected to rise by nearly 2 per cent this year, demand will still outstrip supply, according to the Food and Agriculture Organization of the United Nations.
Compounding the problem were recent moves by two big rice producers, India and Vietnam, to restrict exports in order to preserve ample supply at home. Thailand, the world's largest producer, has also restricted some exports, although the country's Prime Minister vowed yesterday not to cut exports or distort prices.
Rice futures hit a record $24.85 (U.S.) per hundredweight on the Chicago Board of Trade yesterday before closing at $24.82.
The price of the popular Jasmine variety from Thailand, an industry standard, has doubled in the past six weeks.
The global rice crisis is also starting to have an impact on North America.
Sam's Club stores, a division of Wal-Mart Stores Inc., has began restricting the amount of rice customers can buy at outlets across the United States.
"We are limiting the sale of jasmine, basmati and long-grain white rice to four bags per member visit," said company spokeswoman Kristy Reed. "We are working with our suppliers to address this matter to ensure we are in stock, and we are asking for our members' co-operation and patience. At this time, we are not restricting purchase amounts of flour or oil."
Karin Campbell, a spokeswoman for Wal-Mart Canada, said similar restrictions were not in place in Canada.
Costco Wholesale Corp. said it has seen a spike in rice purchases at some stores in the U.S, but so far it has not introduced limits on purchases.
Henry Poon, a spokesman for Vancouver-based T&T Supermarkets, which specialize in Asian products, said the company's stores have enough rice to last a few weeks. "Right now there's a frenzy and there's a bit of chaos in the market place," Mr. Poon said.
The company, which operates 16 stores across Canada, buys most of its rice from suppliers in Thailand and the U.S. Now that Thai supplies have tightened, prices for American rice have jumped 20 per cent in the past month, he said. Many U.S. suppliers also won't enter into long-term contracts in order to take advantage of rising prices. "I guess that's the way it is in the whole industry and that's how we have to accept it," he said.
Rice shortages in the Philippines, one of the world's largest rice importers, have prompted some Filipino Canadians to ship rice packages home to relatives. A popular tradition in Filipino communities is to send relatives balikbayan boxes, which are typically filled with small presents. These days, many people are shoving packs of rice in with their gifts, said Teo Paculanan, of Forex Parcel Delivery Inc. in Toronto. "They do put it in," she said. "We've seen it."
Mr. Poupart at Western Mills said he hopes the Thai government will ease export restrictions soon. Currently, the window for exports opens and closes randomly, he said. The company has found enough rice supplies to get through the next few weeks, but after that no one knows. "We're totally at the mercy of the [exporting] countries."
The rice price
Rising prices for rice can be partly attributed to what's driving up the cost of other crops: Fertilizer is more expensive and oil prices are high. Futures speculation may also be playing a part, although rice futures trading is relatively small. Here are some other
reasons for the price rise:
While acreage for other crops can expand in North America, Europe and South America, there has been almost no growth in land suitable for rice production, which requires flat land, lots of water and a warm climate. Rice bowl areas of China, South Asia and Southeast Asia have been losing land to urbanization.
Low rice stockpiles have created an environment in which supply disruptions can produce rapid price swings. World rice stocks have shrunk from a peak of 130 million tonnes in 2000-01 to 72 million tonnes in 2007-08, according to U.S. Department of Agriculture figures, the lowest level since 1983-84.
Demand is growing quickly in countries with big oil revenues - Iran and Saudi Arabia, for example - which can afford rice at almost any price. At the same time, rice has become widely consumed in African countries such as Ghana, lulled by years of low rice prices and subsidized U.S. exports.
Growth in productivity has been low, running at around 1 per cent. The back-breaking work of growing rice is a disincentive in countries such as China where new urban job opportunities are opening up. Countries such as Japan and South Korea can achieve high yields with mechanized systems and huge inputs of fertilizer and pesticide, but at a big cost.