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Rising Rice Prices Threaten Developing Nations
Rising food prices in the developed world are annoying. In poorer countries, they are a threat to the social fabric. One cannot reason free market economics with millions of hungry people. Since January, the UN’s Food and Agricultural Organization’s All Rice Index has risen 20%. Increased production isn’t going to help much because many producers, fearing hungry citizens, have reduced exports to ensure there is enough to eat at home.
In the Philippines, a major importer of rice, troops had to deliver rice in the capital city of Manila yesterday to ensure that it got to market. Cecil Morella of Agence France-Presse reported
Just hours after rice hoarders and looters were threatened with prison, officials said 20 trucks and armored transports went to the National Food Authority (NFA) to pick up supplies and move them to needy areas. The Army was also providing ‘security aside from assisting in the transport of NFA rice to distribution areas in highly populated and depressed areas,’ said the military chief for the capital, Major-General Fernando Mesa.
Meanwhile, Bloomberg’s Thomas Kutty Abraham writes, “India, the world’s second-biggest producer, banned shipments of rice this week to curb inflation that's at a 13-month high. It set the minimum export price of aromatic Basmati rice at $1,200 a ton and restricted the number of ports for shipments.”
In response to “domestic unrest,” Thailand is slowing rice exports; 90% of Hong Kong’s rice comes from Thailand, which means it would need to find a new source. That will be tricky given its neighbors’ attitudes. Cambodia has banned exports, and Vietnam is slowing its exports. Farther afield, Egypt suspended them until October. Switching to wheat or soybeans may not be possible even ignoring cultural preferences: Argentina has started taxing food exports to keep prices low at home. This will reduce farmers’ income while keeping the urbanites happy, but less income for farmers usually means fewer farmers in the long run, and less food production.
The cause of this shortage is largely increased demand. Asia, in particular, has gotten wealthier in the last couple of decades, and the first thing people do when they get some extra wealth is to eat better – or at least more. Although Thomas Malthus was a bit extreme in his analysis, it is true that it’s harder to increase the supply of food than it is the demand for it.
© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.
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