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By Marianne Stigset and Tony Dreibus, BUSINESS REPORT
Cairo - From Cairo to New Delhi to Shanghai, the run on rice is threatening to disrupt worldwide food supplies as much as the scarcity of confidence on Wall Street earlier this year roiled credit markets.
China, Egypt, Vietnam and India, representing more than a third of global rice exports, curbed sales this year; Indonesia said it might do the same. Investigators in the Philippines, the world's biggest importer, raided warehouses last month to crack down on hoarding.
The World Bank said 33 nations from Mexico to Yemen might face "social unrest" after food and energy costs increased for six straight years.
Rice, the staple food for half the world, rose 2.4 percent to a record $21 (R163) per 45kg in Chicago yesterday, double from a year ago and a fivefold increase from 2001.
It might reach $22 by November, said Dennis DeLaughter, the owner of Progressive Farm Marketing in Texas.
"Rice will gain substantially over the next two years," said Roland Jansen, the chief executive of Swiss-based Mother Earth Investments, which holds 4 percent of its $100 million funds in the grain.
Governments would likely maintain curbs on exports "because those countries want to be able to continue to feed their own populations", he said.
The upheaval parallels the turmoil in global capital markets that seized up nine months ago, when subprime mortgages collapsed.
"Just like in the credit markets back in the first quarter of this year, where people were not lending money to each other, they're not giving rice to each other," David Darst, chief investment strategist at Morgan Stanley Global Wealth Management, told Bloomberg Television.
Rice-growing nations are driving up prices for producers that want to sell abroad. The Vietnam Food Association said it had asked members to stop signing export contracts through June, following China, which imposed a 5 percent tax on exports as of January 1.
Egypt banned rice shipments through October.
Prices "are not coming back to the levels we came from", said Mamadou Ciss, the head of Singapore-based rice broker Hermes Investments. Vietnam's 5 percent broken grain rice might be 40 percent higher within three months, he said.
Record grain prices are stoking inflation.
Wholesale costs in India rose 7 percent in the week to March 22, the fastest pace in more than three years, underscoring the threat from rising food costs, said the ministry of commerce and industry in New Delhi. The increase may boost profits for suppliers. Padiberas Nasional, Malaysia's only licensed rice supplier, rose the most in seven years in Kuala Lumpur stock exchange trading last week.
Goldman Sachs Group forecasts that all the agricultural commodities it covers will rise during the next six months, except for sugar. Global cereal demand would expand 2.6 percent this year, 1.6 percentage points above the 10-year average, said the Food and Agriculture Organisation (FAO) in Rome.
World rice stockpiles are at their lowest levels since the 1980s. The UN forecast that exports would drop 3.5 percent this year.
Demand would increase 0.6 percent this year to 422.5 million tons, while production would rise about 1 percent to 422.9 million tons, said the US department of agriculture.
Global rice yields expanded more than 40 percent from 1980 to 2000, according to data compiled by the department. They have increased only about 5 percent since then.
Stockpiles will fall to 75.2 million tons, about half of where they were at the start of the decade, the data show.
There had been no significant advances in rice seed technology in at least four decades, said Mehdi Chaouky, an agricultural analyst with Diapason Commodities Management in London.
The so-called Green Revolution in the 1960s and 1970s introduced better seeds, technology and irrigation and chemical fertilisers to farming. That improved yields and buoyed food production, according to the FAO.
Some analysts said buyers in Thailand and Vietnam were hoarding grain and might release it in coming weeks, causing prices to drop. Another risk for speculators is that the increase will lead farmers to grow more crops.
For now, governments are limiting exports to ensure they have enough food at home. Vietnam, the third-biggest rice exporter after Thailand and India, will reduce shipments 11 percent this year to 4 million tons.
"Bread is losing its place as the main staple food and rice is replacing it, and this created the problem," said Ali Sharaf Eldin, the chairman of Egypt's Chamber of Grains.
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