The price of rice

Recently, James and I paid $45 for a 25kg bag of rice that less than a year before would have cost $26. Even we in Australia are not exempt from spiraling prices for basic foods, though we have the buying power to obtain what we need. Even the international press has noted that Australia’s drought was contributing to the worsening world food shortage, especially of basic grains.

Australia’s rice production had collapsed to less than 2% of what is has been, due to six years of drought. This collapse is contributing to a doubling of rice prices in the last three months—increases that have led the world’s largest exporters to restrict exports, promoted hoarding and provoked violent protests in many countries. The Myanmar cyclone and looming famine in North Korea have only worsened the situation

The export price of Thai 100-percent B grade white rice, the world’s benchmark, has nearly tripled in price since the beginning of 2008 and a short while ago was $US 1,000 per tonne and climbing. It may reach $1,300 or more.

Scientists and economists worry that the reallocation of scarce water resources—away from rice and other grains and toward more lucrative crops and livestock—threatens poor countries that import rice as a dietary staple. Australia now has some of the world’s highest rice yields for a given quantity of water. But the water isn’t available and many Australian farmers, for example, are abandoning rice to plant less water-intensive crops. Others have sold their fields or their water rights.

Poorer nations worry that subsidies from rich countries to support biofuels, which turn food into fuel, are pushing up the price of staples.

However rice is not used to make biofuel and more than 90 percent is consumed in the countries where it is grown. Global reserves have declined by half just since 2000 and countries that buy rice on the global market are vulnerable to price swings.

The Intergovernmental Panel on Climate Change, set up by the United Nations, predicted last year that even slight warming would decrease agricultural output in tropical and subtropical countries. Moderate warming could benefit crop and pasture yields in countries far from the Equator. Enormous quantities of food will need to be transported from areas farther from the Equator to feed the populations of countries closer to the Equator.

In a piece inTime (24 Apr 08) Jeffrey D. Sachs argues that practical solutions to the shortage do exist, but require decisive action.

The crisis has its roots in four interlinked trends. The first is the chronically low productivity of farmers in the poorest countries, caused by their inability to pay for seeds, fertilizers and irrigation. The second is the misguided policy in the U.S. and Europe of subsidizing the diversion of food crops to produce biofuels like corn-based ethanol. The third is climate change; take the recent droughts in Australia and Europe, which cut the global production of grain in 2005 and ’06. The fourth is the growing global demand for food and feed grains brought on by swelling populations and incomes. In short, rising demand has hit a limited supply, with the poor taking the hardest blow.

The solutions? Sach suggests three actions.

  1. Apply the example of Malawi’s "which three years ago established a special fund to help its farmers get fertilizer and high-yield seeds. Malawi’s harvest doubled after just one year. An international fund based on the Malawi model would cost a mere $10 per person annually in the rich world, or $10 billion in all.
  2. Abandon subsidies encouraging conversion of food into biofuels.
  3. Weatherproof the world’s crops as soon and as effectively as possible, with better msall-scale local water storages, for example.

What is true for food will be true for energy, water and other increasingly scarce resources. We can combat these problems-as long as we act rapidly. New energy sources like solar thermal power and new energy-saving technologies like plug-in hybrid automobiles can be developed and mobilized within a few years. Environmentally sound fish-farming can relieve pressures on the oceans. The food crisis provides not only a warning but also an opportunity. We need to invest vastly more in sustainable development in order to achieve true global security and economic growth.