Rice prices, which have nearly halved from record levels earlier this year, could easily spike again as the global economic downturn increases consumption, an industry expert said on Thursday.
Job layoffs and poor incomes will increase demand for rice because people who have less money to spend will turn to less expensive foods like rice, a staple for nearly half of the world's 6.6 billion population, said Robert Zeigler, director general of the International Rice Research Institute (IRRI).
There is always a risk that the rice price crisis seen this year could be replayed in 2009, Zeigler told Reuters. "When rice drops down to $600-700 a tonne, we shouldn't think the crisis is over. It's still very, very real to the people who have to pay that to survive," he added.
Benchmark Thai rice fell below $600 a tonne this week for the first time in seven months amid thin demand as buyers haggled for lower prices in the belief they would come down further. The price nearly tripled to a record $1,080 a tonne in April as big producers like Vietnam and India curbed exports to secure domestic supply.
Even at current levels, rice prices are still about double the $300 a tonne seen in 2007 and Zeigler said it was unlikely prices would fall below that. "I don't think we will ever see prices down at $200 a tonne again, those days are gone forever. "I don't want to be predicting another big run-up in rice prices but the market is very thin and it's very sensitive to any shocks so we have to be vigilant," he said. Nor does it help that the major rice producers impose export curbs, which only "exacerbate the situation and cause panic," said Zeigler.
CURTAILED INVESTMENTS IRRI, based in the Philippines, expects global rice consumption in 2009 to be around 426 million tonnes, an increase of around 1 percent from the previous year. Global production of the grain is projected to reach a new all-time high of 432 million tonnes in 2009, also up about 1 percent over this year's record 428 million tonnes.
Zeigler said the ongoing credit crisis would also make it difficult for governments to invest in agricultural infrastructure, which is key to boosting long-term production. "We saw those investments were curtailed after the 1997 (Asian) financial crash so I think there's reason to be concerned about that." With the world consuming more rice each year than it can produce, prices have been rising steadily since 2000, he said.
Last week Southeast Asian nations supported an IRRI-proposed action plan meant to boost yields and encourage use of new technology among farmers in the region to increase production. The institute, which breeds high-yielding strains of rice to meet rising demand, kick-started the Green Revolution in the 1970s, helping multiply harvests in Asia and enabling major producers such as China, India and Thailand to industrialise.
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