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The Financial Crisis: Short- and Long-Term Impact on Rice Food Security PDF Print E-mail
Wednesday, 17 December 2008

Samarendu Mohanty, Head and Senior Economist
Social Sciences Division

In the October-December 2008 issue of Rice Today, I wrote a short brief on the aftermath of the rice crisis to highlight the 2008-09 supply and demand situation and the long-term challenges ahead in terms of meeting future demand growth. It seems ages since I wrote that brief because things have changed so drastically in the past few weeks. The world has graduated from a smaller food crisis to a much bigger economic crisis, dubbed by many as the “worst financial crisis in human history.” Global equity markets have been shredded and commodity prices are in a free fall.

The price of crude oil (WTI-Crushing, Oklahoma), which rose to an all-time high of US$145 per barrel on 14 July 2008, was driven down to $44 per barrel on 15 December 2008, a drop of 70% in less than six months, due to the slowdown in economic growth in the U.S. and other parts of the world. Things are no different on the crop side. Since reaching their peak earlier this year, wheat and rice prices have been dropping like a rock in response to record production worldwide. The price for 100% Grade B Thai rice fell to $574 per metric ton on 11 December 2008 compared with a whopping $1,080 per metric ton reached in April 2008. Apart from record production and the economic slowdown, the downward push of commodity prices has been worsened by the action of speculators to sell
their futures positions to free up cash in the face of the credit crunch. A strong U.S. dollar has also played
a part in weakening commodity prices in recent months.

[ Read the research brief (PDF) ]

A background paper by the International Rice Research Institute (IRRI) 
Responding to the Crisis The rice crisis is a major concern for half the world's population. This paper explains the reasons behind the rapid increase in rice prices and what must be done to achieve reliable, plentiful supplies of affordable rice.

What is happening?

The poorest of the world’s poor are the 1.1 billion people with income of less than a dollar a day. Around 700 million—almost two-thirds—of these people live in rice-growing countries of Asia. Rice, the dominant staple in Asia, accounts for more than 40% of the calorie consumption of most Asians. Poor people spend as much as 30–40% of their income on rice alone.  Ensuring sufficient supplies of rice that is affordable for the poor is thus crucial to poverty reduction. Given this, the current sharp increase in rice price is a major cause for concern.  Read more...

 

 

 
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