The price of rice, the staple food for half the world, may advance as wheat’s rally drives consumers to seek alternatives, according to Robert Zeigler, director general of the International Rice Research Institute.
“Rice typically tracks wheat increases,” Zeigler said in an interview on Bloomberg Television today. “Wheat prices started to spike in last July, and rice prices followed them up,” Zeigler said, describing it as a “follow-on effect.”
Wheat climbed to the highest level in more than two years this week on concern drought in China may curb output, boosting competition for dwindling global supplies. The world’s neediest people are most affected by food costs, which reached a record last month, World Bank President Robert Zoellick said yesterday.
“We’re dealing with staple foods here and a price rise in one should lead to some degree of substitution towards another,” Michael Creed, an agribusiness economist at National Australia Bank Ltd. in Melbourne, said today. “There’s good reason to be bullish about rice prices.”
China, the world’s biggest consumer of grains, will spend 12.9 billion yuan ($1.96 billion) to bolster farm production and fight the dry weather, Premier Wen Jiabao said yesterday. The jump in food costs has spurred some nations including South Korea and Bolivia to warn there may be a food crisis. Bolivia will tap central-bank reserves to boost agricultural production and stockpile food, Finance Minister Luis Arce said yesterday.
Wheat on the Chicago Board of Trade, the global benchmark, touched $8.9325 a bushel on Feb. 9, the highest level since Aug. 25, 2008. The grain has surged 71 percent over the past year after Russia banned exports and floods hurt crops in Canada and Australia. Rough-rice futures, trading today at $16.10 per 100 pounds, have gained 12 percent in the past year.
“If wheat production falls, people will have to substitute with something in their diet: rice is the easiest,” said Zeigler, who’s over three decades of experience in agricultural research. There are no signs of panic buying, he said.
A surge in rice may contribute to faster inflation across Asia even as policy makers ramp up interest rates to contain surging consumer prices. The People’s Bank of China raised rates this week for the third time in four months. Central banks in India, Indonesia and Thailand have also tightened.
$10 Wheat Call
Blackstone Group LP’s Byron Wien is among strategists who have forecast a surge in farm-commodity prices in 2011. Wien predicted last month wheat may jump to $10 a bushel this year as “rising standards of living in the developing world seriously increase the demand for agricultural commodities.” Michael Lewis, global head of commodities research at Deutsche Bank AG, said in November that agricultural commodities may extend gains.
About 42 percent of the area planted with wheat in China’s eight major producing provinces has been hurt by the dry spell, according to Minister of Agriculture Han Changfu. The drought- hit central and eastern regions may get some snow or rain in the next three days, the nation’s weather office said today.
Global wheat harvests may trail demand for a second year, spurring hoarding, Abdolreza Abbassian, a senior economist at the Food and Agriculture Organization, said this week. China’s drought may cut the chance of rebuilding stockpiles, he said.
“There’s no doubt that we’re seeing rising food prices just as we saw a couple of years ago and it puts stress on the most vulnerable,” the World Bank’s Zoellick said. “People often in developing countries spend half or three-quarters of their income in food, so they’ve got little margin.”
The International Rice Research Institute, or IRRI, is a research center in the Philippines that develops crop varieties and farm techniques to help growers to improve yields and quality, according to its website.
While the long-term trend for rice price is up, Zeigler said that he doesn’t expect a dramatic increase. “There’s not much to suggest that would be the case,” he said. “We don’t see governments panicking and blocking exports.”
In Bolivia, a portion of the $10 billion in central-bank reserves should be used to increase loans to food producers and lower prices, Finance Minister Arce said. “We are looking at a food crisis that is coming,” Arce said in an interview.
South Korean President Lee Myung Bak this week ordered that a taskforce be set up to study measures to secure food as prices soared. “There is an increasing likelihood of a food crisis globally due to climate change,” Lee said in a statement.
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