Rice prices add to inflation woes

Bruce Lim

In Singapore, where almost 100% of foodstuff is imported, the government has allowed private importers to increase buffer stocks. The Philippines, the world’s largest importer of rice, has been busy shopping for the grain from producers such as China and Pakistan. Whether producer or importer, countries in Asia — a region that produces and consumes the most quantities of the staple — continue to feel the pinch of the rise in rice prices amid inflation that has been climbing in many countries over the last four months.

The average export price of rice has nearly doubled to $585 per tonne today, compared to $326 in 2007, according to the Philippines-based International Rice Research Institute (IRRI). The export price of rice from Thailand, the world’s largest exporter, more than doubled from $376 a tonne in January 2008 to $907 per tonne in May. Prices are expected to stay high in the near future, making Asians nervous because what used to be an affordable staple and taken for granted has become an expensive item.

This is also happening at a time of rising inflation which has economists in the region worried.

Vietnam’s monthly inflation rate is the highest at 26.8%, while Singapore saw the largest jump in inflation rate from 0.5% in 2007 to 7.5% now, according to the Asian Development Bank. “(Current rice) prices are too high for the shortage,” Concepcion Calpe, senior economist for the Rome-based UN Food and Agriculture Organisation (FAO), said. Prices are expected to loosen, however, as “we are expecting new stocks around October and November”.

This is not the first time there is a global food shortage, Calpe points out, recalling that there was a more serious one in the mid-1970s. But it is not just a matter of supply and demand. The jitters in the region — and beyond — are also due to other factors such as the strength of the US dollar as well as the wheat market.

Meantime, Asian countries are coping in different ways. Being at the receiving end of the rice chain, rice-importing countries are the most vulnerable to rising prices as well as stock shortages. Singapore’s senior minister of state for trade and industry S Iswaran said the country’s move to build up reserves “will also help ensure Singapore has a slightly bigger buffer stock of rice than at present so as to cushion us even more against any future supply shock”.

Still, “it’s not easy,” said Khairi, a university student. “It used to cost four (Singapore) dollars for a regular meal. Now I have to pay five dollars for that meal, and still be hungry.” Some governments, like Malaysia’s, have had to make unpopular decisions and cut subsidies because the costs were simply too high. Requests for subsidies were rejected by Singapore’s minister mentor Lee Kuan Yew who said that giving subsidies would eat into incentives to be competitive.

Given the region’s rice problems, some have suggested turning to potatoes. “Many developing countries are seeking new alternative crops which have high-yield productivity and require a short production cycle,” said Thai deputy minister for agriculture and cooperatives Theerachai Seankew. “The potato could be one of the solutions.”

But this is quite hard to swallow for Asians. Remarked retiree Lee Teck Huat: “It’s not that easy. I’m old, and cannot adjust to just eating potatoes. Nor can the younger ones.”