Fear and hoarding at the supermarket

ALBUQUERQUE --The rising cost of rice has been in the news a lot lately, and in the U.S. several retail stores have put limits on the amount of rice customers can buy, leading to headlines about food rationing.

 

So what’s really going on?

 

Prices are high for many reasons (scroll down), but shoppers appear to be reacting to a lot of media hype about high prices by buying and hoarding rice before the prices go higher—thereby increasing both demand and hype.

 

As the International Herald Tribune reported Monday:

 

Global rice prices have risen sharply this year because of growing demand and poor weather in some rice-producing countries. Some Asian countries, including India and Vietnam, have curbed rice exports to guarantee their own supplies.

 

Egypt, Brazil, Indonesia have also banned certain rice exports in the past few months, while countries like the Philippines have increased imports. Part of the concern about rice may be due to

changing demographics that affect rice farming. For example, in the Philippines, there is less land available to grow rice because development has overtaken former rice fields.

 

But Secretary of Agriculture Ed Schafer told reporters

last week that in the US, “We don’t see any evidence of the lack of availability of rice. There are no supply.” He blamed the current crisis on speculation about future rice shortages.

 

At the Costco store on Renaissance Boulevard in Albuquerque, General Manager Jeff Felz said he had not put in place any limits on rice purchases. Every day customers aren’t the issue, he said, but some restaurants do buy rice in bulk at the store. “If they wanted to buy several pallets of rice,” he said, “then we’d probably have to put a limit on that.”

 

But just because rice is available at Costco, doesn’t mean it’s actually available to all. “The price of food is skyrocketing right now, “ Laurel Wyckoff, executive director of the New Mexico Association of Food Banks, said Monday. Wyckoff, who is in charge of ordering bulk foods for distribution through the food banks, said that the price of rice is up 130 percent.

 

For many people, the difference between a $1 bag of rice and a $3 bag of rice is worrying, but not a deal breaker. But rising food prices do put added pressure on food pantries, soup kitchens and social services. According to the New Mexico Human Services Department, applications for food stamps have increased by 4 percent in the last six months.

 

 

The US Department of Agriculture reports that food prices increased by 4 percent in 2007 and it's only going to get worse:

In 2008, the Consumer Price Index (CPI) for all food is projected to increase 4.0 to 5.0 percent, as retailers continue to pass on higher commodity and energy costs to consumers in the form of higher retail prices. The main factors behind higher food commodity costs include stronger global demand for food, increased U.S. agricultural exports resulting from stronger demand and a weaker dollar, weather-related production problems in some areas of the world, and increased use of some food commodities, such as corn, for bioenergy uses.

 

Rice is not widely used for biofuel, but it is subject to much stronger demand, especially the highest grades of rice: Thai jasmine rice and Indian basmati.

 

Business Week broke down the rice crisis in an excellent story posted last week:

 

U.S. long grain rice has doubled, to $800 per ton. Indian basmati rice prices are up 182%, to $2,400 a ton, so far in April, compared to $850 per ton a year ago, while Thai jasmine has more than doubled in price since last year, from $559 per ton to $1,125. …

 

Imports of jasmine rice from Thailand grew 78% in the last 10 years, to 394,000 metric tons in 2007, while basmati imports in the same period grew 112%, to 71,000 metric tons in 2007, according to the USDA. While both types are sold in India and Thailand, these highest-premium variets are rarely consumed in their native countries and are produced mostly for export to Britain, the Middle East, Hong Kong, Canada, the U.S., and Singapore.

 

At Talin Market in Albuquerque, where a wide variety of Asian rice varieties are sold in bulk, Victor Limary, Director of Operations said that depending on the type of rice, his prices have “pretty much doubled” in the past month.

 

“What I’ve been hearing from the producers is—no offense to you-- but they're saying that a lot of the media been creating a frenzy [over rice]. It’s like with gas prices, if every day all you hear is how expensive gas is getting, it sounds like a crisis. But they’ve always paid more in Europe and they’re still paying more. We have enough supply [of rice], but the stories are creating a frenzy and that’s creating more demand.”

 

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