Wednesday, December 9, 2009

Are rice prices about to spike?

By Javier Blas in London

Published: December 8 2009 17:53 | Last updated: December 8 2009 17:53

Rice prices have moved to levels not seen since last year's "super-spike" as a buying spree by the Philippines, the world's largest importer, tightens the market.

Manila received offers on Tuesday for it to buy low-quality rice at about $630 a tonne, up 30 per cent from last month's tender, and double the $320 a tonne seen earlier this year.

The rally comes as global rice production is set to fall in 2009-10 for the first time in five years as a result of India's driest monsoon in four decades, a series of typhoons destroying crops in the Philippines and droughts elsewhere because of the El NiƱo weather phenomenon.

"It feels a little like early 2008," said Frederic Neumann, an economist at HSBC in Hong Kong, referring to the "super-spike" when rice reached a record $1,000 a tonne in April 2008.

The supply shortages have triggered concerns about a surge in food inflation in Asia, where rice is a staple. Darren Cooper, a senior economist at the International Grains Council in London, said: "Rice is obviously a political commodity in Asia."

As prices soar, traders are worrying that policymakers could react with the same panic measures that fuelled the rally last year by hoarding stocks and imposing export restrictions.

"This highlights one crucial risk," Mr Neumann explained. "Prices can quickly escalate if jittery consumers and public officials see supply risks looming, even if these are more perceived than real."

If rice is a part of your food storage preparations, you may want to stockpile more before the price goes sky-high. My family loves rice and it can be served many different ways, so it has a big place in my preps. Guess it is time to stock up on some more while I can...

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