Wednesday, April 23, 2008

Rice Shortage

PAPER: America faces food rationing?...

This weekend 20 pound bags of Rice were up for grabs at Capital Region Price Choppers for something like $7.99 - they're probably still on sale and you might want to stock up - before the panic:
An anonymous high-tech professional writing on an investment Web site, Seeking Alpha, said he recently bought 10 50-pound bags of rice at Costco. "I am concerned that when the news of rice shortage spreads, there will be panic buying and the shelves will be empty in no time. I do not intend to cause a panic, and I am not speculating on rice to make profit. I am just hoarding some for my own consumption," he wrote.
Yeah, right, okay... Rice prices have been setting new records because of a supply shortage and strong demand. They have also following strong gains by wheat prices in the past 10 months. Chicago Board of Trade July rough rice futures rose by 1.5 percent to $24.43 a hundredweight in early trading on Monday, compared with Chicago's closing price on Friday, but was slightly off its record high of $24.67.

The latest record high was touched during Friday's trading in Chicago. Rice for May delivery rose 41 cents, or 1.8 percent, to close at $23.71 per 100 pounds on the Chicago Board of Trade, after earlier reaching $24.355, the highest ever. The contract gained 13 percent for the week and has more than doubled in the past year.

Californians are getting a taste of "rice sticker shock" -
The global rice panic has come to south Sacramento.

As word of food riots and export shutdowns in Asia reached California in recent weeks, worried shoppers have been buying up hundreds of pounds of rice at a time from the Asian supermarkets that line Stockton Boulevard, looking for security against rising prices.

"When people saw the price jump $2 or $3, they started buying like crazy – 10 bags, 15 bags," said Cu Van, a floor manager at Goldstar Supermarket. Each bag weighs 50 pounds.

In recent weeks, the retail price for a 50-pound sack of Thai jasmine rice, the prized variety served steamed in Chinese and Southeast Asian cuisine, has risen from roughly $20 to $40, straining budgets for families and restaurants.
Rice looks to be quite volatile, since governments in many nations -- including across Asia's "rice bowl" -- consider rice not just a staple, but a national security priority.

What makes rice supply/demand special is that almost all of the crop is consumed where it is grown. Only six per cent of world rice is exported, compared with 17 per cent for wheat, the other main food grain.

Demand for rice would continue to be strong, said Darrell Holaday, president of Advanced Market Concepts in Manhattan, Kansas.

“There’s no substitute for rice,” Holaday said. “Maybe some people in Asia will eat more noodles and less rice.”

Thailand, the world’s largest rice exporter, boosted shipments 66 percent in the first three months, according to Commerce Minister Mingkwan Sangsuwan on April 16.

The nation’s 100-percent Grade B White Rice gained 54 percent in the month to April 9, according to data from the Rice Exporters’ Association.

The Philippines, the world’s biggest rice importer, received offers for just two-thirds of the grain it sought at a tender on Thursday at prices about 40 percent higher than in March.

The country, which imported 1.9 million tons of rice last year, fills 10 percent to 15 percent of local needs from external suppliers.

The jump in rice prices had forced some buyers to cut the size of their orders, said Apichat Chansakulporn, managing director of President Agri Trading, Thailand’s fourth-largest rice exporter.

“Clients are slowing their purchases because the prices are very high,” Apichat said by telephone from Bangkok.

Price gains were “driven more by psychological impact than real demand and supply. The perception is now toward an uptrend.”

A global food crisis had reached “emergency proportions,” United Nations Secretary-General Ban Ki-Moon said April 14. The World Bank has forecast that 33 nations from Mexico to Yemen may face social unrest after food and energy costs increased.

Souces: Bloomberg, Reuters AP, NY SUN,

Japan: Where has all the butter gone?

Guess who is behind the Food Crisis? BIG OIL! Read on...

Mr. & Mrs. Howell and others of their ilk may soon be the only Americans able to afford bread, milk, eggs, corn and gasoline.

The top story a few weeks ago in the Saturday 50 cent edition of the Times Union: "Recession Fears" with photos of George Washington next to some Pounds and Pesos, a Wall Street dude and those ever-risin' gasoline prices. The headline screamed "Economy On The Ropes" and according to the Cox News Service article that followed last month saw the "Biggest job loss in 5 years" which "shocks analysts, who expected payrolls to increase in February" [what were they smokin'] and a report that 63-thousand jobs "disappeared" in February.
See Also: David Leonhardt: Seeing an End to the Good Times (Such as They Were)
The story we all SHOULD BE CONCERNED ABOUT was tucked down in the lower right-hand column, headlined "Ethanol fuels new worries." To date I'm battin' a thousand when it comes to predictions about gas prices, housing and the economy. NOW HEAR THIS: Ethanol will be what puts the nail in the current economy's coffin."

The original article appeared in the L.A. Times back on March 2nd...key points:
Corn is a key element of the U.S. food supply. It is what dairy cows eat to make milk and hens consume to lay eggs. It fattens cattle, hogs and chickens before slaughter. It makes soda sweet. As the building block of ethanol, it is now also a major component of auto fuel...

Economists are cautioning that the nation's growing dependence on corn would make for a double jolt in the event of a drought across the Midwest: soaring prices not just for food but also for gasoline...

Because of the interrelationships among crops, a major shortfall in the U.S. harvest could tip global grain and soy markets into chaos. It would affect the prices of food made directly from these commodities, such as bread, pasta and tortillas, and food made indirectly, such as pork, poultry, beef, milk and eggs.

If it happened this summer, it would be especially bad because of the current pace of global food inflation.
The bad news is that it COULD happen this summer! The entire original article is available HERE. Every American should read it!

And we go on...
What's going on with the economy? Paul Krugman blogs through some basic scenarios.
"The financial crisis seems to have entered its third wave. Panic in August, then partial recovery thanks to lots of money thrown at the system by the Fed. Renewed panic late fall, then partial recovery thanks to even more money thrown in, especially the Temporary Auction Facility. And panic has set in yet again...This is now the third time Ben & co. have tried slapping the market in the face — and panic keeps coming back"
Krugman cites Steve Randy Waldman's Interfluidity blog. In an earlier blog posting of his, Waldman makes a distinction between a panic and a reckoning.

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