Grain prices soar globally

Rice shortages are appearing across Asia. In Egypt, the Army is now baking bread to curb food riots.

Rice farmers here are staying awake in shifts at night to guard their fields from thieves. In Peru, shortages of wheat flour are prompting the military to make bread with potato flour, a native crop. In Egypt, Cameroon, and Burkina Faso food riots have broken out in the past week.

Around the world, governments and aid groups are grappling with the escalating cost of basic grains. In December, 37 countries faced a food crisis, reports the UN Food and Agricultural Organization (FAO), and 20 nations had imposed some form of food-price controls.

In Asia, where rice is on every plate, prices are shooting up almost daily. Premium Thai fragrant rice now costs $900 per ton, a nearly 30 percent rise from a month ago.

Exporters say the price could eclipse $1,000 per ton by June. Similarly, prices of white rice have climbed about 50 percent since January to $600 per ton and are projected to jump another 40 percent to $800 per ton in April.

The skyrocketing prices have prompted millers to default on rice supply contracts and bandits to steal rice as they aim to hoard the crop, and sell it later, as prices continue to rise.

“The farmers are afraid as their fields have been robbed in the nighttime,” says Sarayouth Phumithon, an official at the Thai government’s Bureau of Rice Strategy and Supply. “This is just the beginning. The problem will get worse if the price keeps increasing.”

The reported thefts in five rice-growing provinces in central Thailand are the first signs of criminal activity in this region stemming from the sharpest global spike in commodity prices since the oil crisis in the mid-1970s. Across the world, higher food prices are triggering thefts and violence – both by people who can’t afford to eat and those who want to make an easy buck.

Three men delivering food for the World Food Programme (WFP) in Sudan were reported killed Tuesday, the latest in a surge of attacks that have delayed the arrival of vital supplies to some 2 million people in the region.

So far this year, the UN agency says 56 trucks have been hijacked in Sudan; 36 trucks remain missing, and 24 drivers are unaccounted for. The WFP says that banditry has reduced by half the amount of food normally transported to the western region of Darfur at this time of year.

“All parties must recognize that the drivers of humanitarian vehicles and their cargo are serving a neutral purpose,” WFP Sudan representative Kenro Oshidari said in a statement.

Last year, the Food and Agriculture Organization’s food price index increased an unprecedented 40 percent from 2006, and this year it is projected to continue rising. Surging oil prices (in turn, boosting fertilizer and transport costs) combined with a drop in production due to droughts in Australia and the Ukraine have helped to drain global food stocks.

While rice production is rising, consumption is growing faster. The US Department of Agriculture forecast rice stocks to fall to their lowest level since the mid-1970s, and wheat stocks are projected to hit their lowest point since 1946, the year after World War II ended.

These factors, combined with a falling US dollar, steadily rising demand from developing countries, and biofuel policies that mop up excess cereal production, have all helped boost world prices.

The FAO expects food prices to stay high for the next three to five years, presenting a challenge for governments trying to keep domestic food prices low in order to keep poor citizens properly fed and avoid mass protests and social unrest.

Some countries like Vietnam, India, and Pakistan have banned grain exports. On Wednesday, Cambodia’s prime minister ordered a two-month ban on rice exports to neighboring Thailand and Vietnam “to guarantee food security.”

Meanwhile food importers Indonesia, Korea, and Mongolia have cut or reduced import tariffs. As Philippine farmers warned that the country was facing a serious rice shortage, the government signed a deal Wednesday to import 1.5 million metric tons (1.65 million US tons) of rice from Vietnam.

Analysts note that the current shortage isn’t hitting as many people as hard as past shortages. As incomes rise worldwide, food is a smaller portion of the family budget. “Governments have tried to protect domestic prices from fluctuations in international prices, and they have succeeded in the past,” says Sumiter Broca, a policy analyst at the FAO. “The key point is that the proportion of income spent on food is much lower than it used to be, so that provides a cushion. The situation is not as serious as it was in 1974.”

Citizens of Nepal and India now spend about 35 to 40 percent of income on food, down from about 70 to 80 percent in the early 1970s, Mr. Broca says. In developing countries, food costs eat up only about 7 percent of household incomes.

The FAO expects food prices to stabilize and eventually drop as farmers plant more grains. That’s already starting to happen with wheat and corn. But the next few years could be difficult.

On Monday, the WFP, a UN agency that distributes food aid to some 70 million poor people, made an “extraordinary emergency appeal” to donor countries for $500 million to prevent cutbacks in its global operations.

In the past two weeks, two rice suppliers in Cambodia defaulted on contracts with the WFP, claiming the new higher prices would offset any penalty for reneging on the contract.

“That’s extremely worrying, as it indicates the price of rice, just like the price of wheat, is now continuing to increase,” says Paul Risley, a WFP spokesman. “That makes it very difficult for us to find rice at an affordable price. The ability to end malnutrition is limited when food prices are so high.”

Countries with higher foreign exchange reserves and food stocks, including China, Japan, and India, can still afford the high food prices if necessary. But nations with low currency reserves like the Philippines, Pakistan, Bangladesh, and Nepal may need assistance from international financial institutions to afford food if prices continue to spike.

Although higher food prices mean trouble for consumers and governments, they do increase incomes for farmers – assuming their crops aren’t stolen. Still, farmers aren’t making as much money as a middleman with a good-sized warehouse.

Rice millers in Thailand are defaulting on contracts with exporters to capitalize on higher prices, and speculators are renting warehouses to store paddy. Rice in paddy form (in the husk) can be stored for about a year and a half before quality starts to deteriorate, and milled rice can be held for another six months.

“Nobody dares to sell now as we don’t know where the price is going,” says Chookiat Ophaswongse, president of Thailand’s Rice Exporters Association. Although Thailand, the world’s largest rice exporter, has shipped record amounts in January and February, traders have lost money on futures contracts as prices have jumped more quickly than anyone expected, he says.

In the Philippines, President Gloria Macapagal Arroyo has vowed to crack down on rice hoarders. The government has ordered police to stake out warehouses and follow trucks to see where the rice was going, she said.

Thailand may try to sell off 2.1 million tons of rice stocks to keep domestic prices low. But as long as prices stay high, Thai farmers will need to burn the midnight oil keeping watch over their fields.

“Most farmers must sell crops immediately as they don’t have a good warehouse that can withstand attacks from rats, birds, chickens – or human thieves,” says Mr. Sarayouth.

Associated Press reports were used in this story.