The price of rice, a staple food commodity, is set to remain at or near record highs for the remainder of the year, but optimism about a fall next year is growing. The news, from the UN Food and Agriculture Organization (FAO), is welcome as fear of a food shortage grips the world, leading to panic buying and protests in some countries. It also is great news for food retailers who are currently being stung by the rapid rise in food price inflation (particularly for wheat, corn, rice and dairy products).

Rice production in Asia, Africa and Latin America is forecast to reach a new record level in 2008, the FAO said yesterday, warning that world rice prices could remain high in the short term, as much of the 2008 crops will only be harvested by the end of the year.

“World paddy production 2008 could grow by about 2.3 percent reaching a new record level of 666 million tonnes, according to our preliminary forecasts,” said FAO rice expert Concepcion Calpe. Production prospects, however, are negative for Australia, the United States and Europe.

Production growth could even be higher if recent appeals and incentives to grow more rice lead to a larger expansion of plantings, according to the Rice Market Monitor. “But the cyclone disaster in Myanmar could well worsen our forecast,” she added. Myanmar may need to turn to neighbouring countries, such as Thailand and Vietnam for rice imports. This could lead to further pressure on world prices.

Rice prices have skyrocketed by about 76 percent between December 2007 and April 2008, according to the FAO Rice Price Index. International rice prices are expected to remain at relatively high levels, as stocks held by exporters are expected to be reduced heavily. In addition, other large importers will probably return to the international market to buy rice, including the Islamic Republic of Iran, Saudi Arabia, Nigeria and Senegal. “Prices are expected to remain extremely firm, at least until the third quarter of 2008, unless restrictions on exports are eased in the coming months,” Calpe said.

In an attempt to avoid food scarcities in their own countries, major rice exporters have recently imposed export bans, taxes or minimum ceilings. “These measures further restricted the availability of rice supplies on international markets, triggering yet more price rises and tighter supply conditions. At the moment, only Thailand, Pakistan and the United States, among leading exporters, are exporting rice without any constraints,” Calpe added. Rice exports are expected to fall by about 7% this year, as a result.

For prices to fall, favourable weather conditions must prevail in the coming months and governments relax rice export restrictions. Even then, rice prices are unlikely to return to the levels of 2007, as producers have to pay much more for their fertilizers, pesticides and fuel.

Average world rice consumption per person is set to increase by 0.5 percent to 57.3 kilo per year, up from 57 kilo in 2007. Despite high rice prices, consumers have appeared to shift away from more foods which remain more expensive, in particular meat and meat products.

The sudden surge in world rice prices has shed some light on major medium term constraints that have been often ignored in the past two decades, such as low investment in agriculture, especially irrigation, reduced funding for agricultural research, environmental problems, stagnating productivity and migration from rural areas to the cities.

The UN also announced that several Heads of State and Government will meet in Rome (3-5 June 2008) to discuss the impact of soaring food prices and how to improve world food security.

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