Rice traders hit by panic as prices surge

By Javier Blas in London and Raphael Minder in Hong Kong

Financial Times of London

Published: April 18 2008

Rice prices hit the $1,000-a-tonne level for the first time as panicking importers yesterday scrambled to secure supplies, exacerbating the tightness already provoked by export restrictions in Vietnam, India, Egypt, China and Cambodia.

The jump came as the Philippines, the largest rice importer, failed for the fourth time to secure as much rice as it wanted.

The unsuccessful tender followed Bangladesh's inability to buy any rice at all this week.

Traders and analysts warned that rice demand was escalating in spite of prices rising to three times the level of a year ago as countries try to build up stocks.

Vichai Sriprasert, president of Riceland International, a leading rice exporter in Bangkok, said several of its customers, including governments, were buying far more than they usually did amid fears about scarcity.

"It is panic," he said. "My customers are demanding double the usual volume. We do not have enough supplies for all the demand we are facing."

Michael Whitehead, a rice specialist at Rabobank in New York, added: "The potentially destabilizing social effect of rice shortages in most high consumption countries has strengthened the resolve of governments to build supply."

Rising rice prices have triggered riots in the past month in countries such as Haiti, Bangladesh and Ivory Coast. Rice is considered the most political agricultural commodity as it is a staple for about 3bn people in poor countries in Asia and Africa.

Ajith Nivard Cabraal, Sri Lanka's central bank governor, told the Financial Times that the rise in food prices was "definitely" a bigger problem for Asia than the ongoing credit crunch.

"Food is something which without we cannot live," he said. "Social consequences could be very adverse."

In an effort to maintain social peace through low local prices, governments have stepped up their purchases.

Manila's rice tender yesterday received offers for only 325,000 tonnes, a third below the government's target. It faced record prices, with the average offer at $1,046 a tonne, up 47 per cent from March. Some of the offers hit $1,220 a tonne.

That strength boosted indicative quotes for Thai medium-quality rice, the global benchmark, to a range of $950-$1,000 a tonne, traders said. In Chicago, US rice futures hit an all-time high of $23.3 per 100 pounds. (Or 466.00 a ton. – One has to wonder why these foreign countries do not buy rice from the US at less than half the price?) [We note here that these is still time to stock up on food basics locally before the full impact of these highly inflated food prices hit local markets.

But Anthony Lam, of Golden Resources, the largest rice wholesaler in Hong Kong, said prices were near their peak. "There is now no big natural disaster to raise it further."