Noon International: Food Trading Import Export

Wal-Mart, the world’s largest retailer announced last week that it would ration the rice each customer can purchase at it Sam’s Club stores because of recent “supply and demand trends”. “We are limiting the sales of Jasmine, Basmati and Long Grain Rice to four bags per member visit” the company said in a statement.
Costco, the USA largest warehouse retailer, last week made a public announcement stating it had seen increased demand for basic food staples as well like rice and flour. The company had a two 50 lb limit on rice purchases as well to keep people from hoarding and reselling the rice.

So how do we put the current rice situation into perspective?

The world has over 50 000 edible plants. Just three of them, rice, maize and wheat, provide 60 percent of the world’s food energy intake. Rice is the predominate staple for fifteen countries in Asia and the Pacific, ten countries in Latin America and the Caribbean, one country in North Africa and seven countries in Sub-Saharan Africa according to the FAO. This translates to the fact that rice is a staple food for close to 50% of the world’s population.

Over the past 3 months rice has surged from USD$400 MT in January to USD$770 in March. In the past week, the benchmark Pathumthani Thai rice was priced at $930/MT, which is up 52% in just a month, according to the Thai Rice exporters association.

Thailand, the world’s biggest rice exporter, has recently rejected selling some of its two million tones of rice stockpile as prices soar towards USD$1000/MT. As a result, global shortages and hoarding are emerging, with food riots recently in the Philippines, Haiti, Egypt and many African nations.
The UN warned in February that 36 countries, including China, face food emergencies this year as prices of rice and wheat soar, and world stockpiles of coarse grains fall to multi-decades lows.

So what is causing the increase in prices? Supply and demand? Yes, but what is behind this supply and demand equation.

There is no doubt that weather-related issues can take part of the blame however not all of it. Farmers in North America, Europe and some Latin American countries are switching to crops destined to the production of biofuels.

Government food subsidies paid to North American and European farmers have decoupled from production, this has put an end to an era of overproduction as global inventories keep coming down.

Global population keeps going up, the United Nations expect population to reach 8.13 billion by 2030, this is a 26% increase from 2005.

The industrialization of the Chinese economy is driving rise in per capita incomes hence an increase in living standards. So Chinese people have now more disposable income to buy food, the result is a change away from staple foods to include a more balanced diet of animal protein and dairy products. Nevertheless this dietary change has a multiplier effect on coarse grain consumption. Consensus is that two kilos of grain produce one kilo of chicken or one liter of milk. Three to four kilos of grain are required to produce 1 kg of pork and six to eight kilos are needed to produce 1 kg of beef.

So it isn’t only rice, it’s a bit more complex than just rice I would say. The effect of what is happening to staple foods in our global village is something worth considering since it is going to affect our pockets sooner rather than later.

Technorati Tags: Noon International, Rice, Food Riots, Wal-Mart, Costco

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