In the News - June 2008
Why are rice prices so high?
LITTLE ROCK - The recent rapid rise in global rice prices can be blamed on
stockpiling, hoarding and/or profiteering. This was triggered by tight, but
adequate, global supplies, rising oil and grain commodity prices and speculators
bidding the price of rice up, says Dr. Bobby Coats, extension agricultural
policy analyst with the University of Arkansas Division of Agriculture.
It has created global supply availability and distribution problems, and some
major U.S. retailers have limited rice purchases to maintain their supply
pipeline.
"These high rice prices are a catastrophic financial problem for many of the
world's population who live, at best, in dignified poverty," Coats says.
Coats says the hoarding and stockpiling is unusual because there is not a
global shortage of rice.
"The USDA estimates that global rice consumption has exceeded global rice
production in four of the current eight marketing periods, but in the current
four marketing periods, global rice production has exceeded consumption," he
says.
However, he notes, many rice analysts have been concerned that global
supplies were not adequate to deal with a catastrophic global weather or other
disruptive event.
Coats expects global rice prices to continually move higher for several
reasons. The global economy is operating in an inflationary economic setting.
Rice and commodity producers' cost of production are rapidly rising, and farm
market rice prices must rise fast enough to encourage more rice production.
The cost for producing rice in 2008 will be 100 percent higher than the 2002
rice cost, according to Coats. U.S. and global rice prices must reach a level
that guarantees adequate global rice production.
"U.S. rice producers will plant rice if the market signals a market price
that covers their cost of production: otherwise, they won't plant rice. Few, if
any, U.S. rice producers will be planting for the government in the future,"
Coats said.
He says governments must assess their rice situation and act in their
countries' and citizens' best interest.
For many of the world's subsistence population living in poverty, he says,
it's a necessity for governments to intervene with subsidies and needed controls
to ensure economic and political stability and minimize global hunger and
starvation.
"The economic impact even here in the U.S. from inflationary food prices and
the inflationary setting in general has the potential to move this country
toward increasing protectionism policies," he notes. This, he adds, would be
devastating, not only to the U.S. economy but also to the global economy
While all countries protect their food sectors to some extent, the biggest
danger to the world, Coats believes, is for country after country to become more
protectionist. "There is no option but to allow rice and other food commodity
prices to reach levels that will guarantee adequate production," he says. Higher
prices are difficult for people, but protectionism and a deflationary global
economy would be a total economic nightmare for most of the world's population.
Hear Bobby Coats' podcasts on the global economy at
www.uaex.edu or at
www.aragriculture.org/agfoodpolicy/radio/default.htm.
The Cooperative Extension Service is part of the U of A Division of
Agriculture.
June 20, 2008
Media Contact: Lamar James
Extension Communications Specialist
U of A Division of Agriculture
Cooperative Extension Service
(501) 671-2187 or (501) 753-0207
ljames@uaex.edu
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