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COLUMNISTS
TODAY'S STORIES
03.04.2008
The Price of Rice

There is havoc in the markets for rice and other important staples like palm oil all over Asia and Africa. There is also panic in some streets. Even in America the cost of basic foods has been rising for months. Not exactly that there is hysteria in the U.S. But clearly many Americans are aching.

The drama is clearest in Asia where bans on the exportation of rice have been put into immediate effect. And a reduction or complete suspension of import tariffs on other foods. This seems like an auguring of the old Malthusian nightmare. If you want a basic guide to what's going on read the first page story by Alan Beattle in Wednesday's FT.

But there is a twist to old Malthusianism. As people have been getting richer, let's say in China and India, more people are eating more rice.  Thus, there is more demand for rice. Much more demand for rice. This means that there is no longer enough rice for the poor hundreds of millions who are being priced out of the market.

In the western countries there is a shortage of cash. In the other countries there is a shortage of rice.

Posted: Thursday, April 03, 2008 4:26 PM with 21 comment(s)

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teplukhin2you said:

Easy answer to this one, though not the answer that hysterical GM foes want to hear: google Norman Borlaug, the Texas A&M scientist who singlehandedly rescued hundreds of millions of asians from starvation via GM rice strains that increased yields many times.

If Borlaug's innovations were to be adopted across Africa, and if the West and the WB were to pony up for the roads and other infrastructure needed to get the rice to (Asian) market(s), many millions of desperately poor African farmers would suddenly be earning a respectable income and the rice market would stabilize at a lower price, with less inflationary consequence for poor and non-poor consumers around the world.

April 3, 2008 4:50 PM

The Ignorant Populist said:

Great minds think alike Marty.

I was looking for a chance to rant and rave about our Malthus friend. The man was a plagiarist - his entire essay was a rip off of a Venetian attack on the positive population theory put forward by Benjamin Franklin; a Mr Gianmaria Ortes wrote the attack on Franklin in 1774. Malthus's gimmaky "law of geometric progression" was an attempt to bamboozle people with poor mathematics.

How anyone can still look at Malhusiamism as anything other than propaganda after the spectacular growth in technology, agriculture and population since 1798 is beyond me.  

April 3, 2008 4:59 PM

luispc said:

There are of course some objective factors that explain the rise in prices of commodities and foods these last months. But that explanation is only partial. An important part of explanation comes from speculation (Wall Streeters and other speculative "free marketeers" have started to put their "naked money" here, expecting "naked profits" as they always do, beginning to ruin the only market that they haven't completely ruined yet, since they've already reached that result in every other market, from the job market to the financial market, from the housing market to the currencies market...)

April 3, 2008 5:24 PM

The Ignorant Populist said:

Exactly right my social democratic friend. No to "hot money" - Yes to investment in infrastructure.

(Now, how do I fit that on a banner. Investment in infrastructure just isn't catchy enough and I'll get laughed at if I turn up with that. Something that captures the historical...ah f*ck it, it's late: Yankee go home! Tried and tested.)

April 3, 2008 5:39 PM

teplukhin2you said:

From Wikipedia's detailed tribute to Dr Norman Borlaug, who per Congress's tribute to him "has saved more lives than any other person who has ever lived, and likely has saved more lives in the Islamic world than any other human being in history."

en.wikipedia.org/.../Norman_Borlaug

...During the mid-20th century, Borlaug led the introduction of these high-yielding varieties combined with modern agricultural production techniques to Mexico, Pakistan, and India. As a result, Mexico became a net exporter of wheat by 1963. Between 1965 and 1970, wheat yields nearly doubled in Pakistan and India, greatly improving the food security in those nations. These collective increases in yield have been labeled the Green Revolution, and Borlaug is often credited with saving over a billion people from starvation.[3] He was awarded the Nobel Peace Prize in 1970 in recognition of his contributions to world peace through increasing food supply.

...Borlaug has dismissed most claims of [his environmental] critics, but does take certain concerns seriously. He states that his work has been "a change in the right direction, but it has not transformed the world into a Utopia".[28] Of environmental lobbyists he has stated, "some of the environmental lobbyists of the Western nations are the salt of the earth, but many of them are elitists. They've never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they'd be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things".[29]

...In the early 1980s, environmental groups that were opposed to Borlaug's methods campaigned against his planned expansion of efforts into Africa. They prompted the Rockefeller and Ford Foundations and the World Bank to stop funding most of his African agriculture projects. Western European governments were persuaded to stop supplying fertilizer to Africa. According to David Seckler, former Director General of the International Water Management Institute, "the environmental community in the 1980s went crazy pressuring the donor countries and the big foundations not to support ideas like inorganic fertilizers for Africa."[20]

In 1984, during the Ethiopian famine, Ryoichi Sasakawa, the chairman of the Japan Shipbuilding Industry Foundation (now the Nippon Foundation), contacted the semi-retired Borlaug, wondering why the methods used in Asia were not extended to Africa, and hoping Borlaug could help. He managed to convince Borlaug to help with this new, huge effort,[7] and subsequently founded the Sasakawa Africa Association (SAA) to coordinate the project.

The SAA is a research and extension organization that aims to increase food production in African countries that are struggling with food shortages. "I assumed we'd do a few years of research first," Borlaug later recalled, "but after I saw the terrible circumstances there, I said, 'Let's just start growing'."[20] Soon, Borlaug and the SAA had projects in seven countries. Yields of maize and sorghum in developed African countries doubled between 1983 and 1985.[30] Yields of wheat, cassava, and cowpeas also increased in these countries. At present, program activities are under way in Benin, Burkina Faso, Ethiopia, Ghana, Guinea, Mali, Malawi, Mozambique, Nigeria, Tanzania, and Uganda.

Since 1986, Borlaug has been the President of the SAA. That year, Jimmy Carter initiated Sasakawa-Global 2000 (SG 2000), a joint venture between the SAA and the Carter Center's Global 2000 program. The program focuses on food, population and agricultural policy. Since then, over 1 million African farm families have been trained in the SAA's new farming techniques. Those elements that allowed Borlaug's projects to succeed in India and Pakistan, such as well-organized economies and transportation and irrigation systems, are severely lacking throughout Africa, posing additional obstacles to increasing yields. Because of this, Borlaug's initial projects were restricted to developed regions of the continent.

Despite these setbacks, Borlaug has found encouragement. Visiting Ethiopia in 1994, Jimmy Carter won Prime Minister Meles Zenawi's support for a campaign seeking to aid farmers, using the fertilizer diammonium phosphate and Borlaug's methods. The following season, Ethiopia recorded the largest harvests of major crops in history, with a 32% increase in production, and a 15% increase in average yield over the previous season. For Borlaug, the rapid increase in yields suggests that there is still hope for higher food production throughout sub-Saharan Africa.[20]

...On September 27, 2006, the United States Senate by unanimous consent passed the Congressional Tribute to Dr. Norman E. Borlaug Act of 2006. The act authorizes that Borlaug be awarded America's highest civilian award, the Congressional Gold Medal. On December 6, 2006, the House of Representatives passed the measure by voice vote. President George Bush signed the bill into law on December 14, 2006, and it became Public Law Number 109–395. According to the act, "Dr. Borlaug has saved more lives than any other person who has ever lived, and likely has saved more lives in the Islamic world than any other human being in history." The act authorizes the Secretary of the Treasury to strike and sell duplicates of the medal in bronze. He was presented with the medal on July 17, 2007.

April 3, 2008 5:43 PM

blackton said:

let us not forget about those unfortunate countries that print their money on Rice paper.

Down here in Oaxaca there is a transport strike by buses and taxis against people on the even lower end of the income scale, motorized pedicabs, the kind where scooters pull a cart with a seat on it. They want them to be illegal so they have closed off all the roads everywhere, forcing even little kids to walk down long stretches of road in the intense sun to get to school. 1/5 of the students who live in other cities and commute are not even here, but luckily the rest are local. No idea when it will end.

Oh, and Marty, in China the wealthier people become the less they eat rice. Rice is more of a lunchtime staple, at nice restaurants you have to ask for the rice at dinnertime. Only the very poor eat rice 3 meals a day. The reason why basic foodstuffs is going up in China have little to do with the supply, but for such things as cost of fuel (remember, China links their currency to the US, hence gas has shot up for them as it has for us) and also general inflation.

April 3, 2008 5:58 PM

sdemuth said:

"who singlehandedly rescued hundreds of millions of asians from starvation via GM rice strains that increased yields many times"

Yes, the strains of rice and wheat developed by Borlaug and others did in fact revolutionize agriculture in the third world.  But they were not GM strains as that term is generally understood.  They were created by good old fashioned hybridization, long before gene transfer and gene splicing were mastered.  That means that Borlaug's (and others') rice plants that made the green revolution have only rice genetics in them, and wheat only wheat genetics.

Furthermore, the genetic changes were not as large as is commonly believed.  Most of the yield increase in the last 50 years has been a result of synthetic fertilizer and more intensive cultivation, not genetic manipulation.  Note the Borlaug quote in tep's post :  "If they lived just one month amid the misery of the developing world, as I have for fifty years, they'd be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things."  Doesn't mention new seeds - it's all about fertilizer and cultivation methods.

April 3, 2008 6:41 PM

sdemuth said:

Another thing not mentioned here is the degree to which US farm end energy policy is contributing to the market disruptions.  There is a global market for vegetable oil and for starch to some degree, and by withdrawing increasingly large quantities of the stuff from the food and feed stream to make ethanol or biodiesel, we're displacing markets world wide.  To some extent, and in some places, that is already having a direct effect, but it's more prevalent effect right now is to drive speculation in feed and oil crops.  The speculation itself then disrupts local markets.

April 3, 2008 6:53 PM

ndmackenzie said:

The Wall Street Journal published an article on Monday which suggested the current rice shortages are caused by speculation:

-- As rice prices hit new highs, farmers across Asia are hoarding their crops, raising the prospect of a shortage in Asia and Africa that could lead to widespread unrest.

-- Rice prices in Asia have doubled since the beginning of the year, driven higher by rising demand, a steady depletion of government stockpiles and a pest outbreak in Vietnam, the world's second-largest exporter after Thailand.

-- On Thursday, medium-grade rice exported from Thailand -- a de facto market benchmark -- reached $760 a metric ton, up from $360 a ton at the end of last year.

-- Governments around the region are curbing exports to safeguard their domestic supply, putting further upward pressure on prices.

-- Chookiat Ophaswongse, president of the Thai Rice Exporters Association, says farmers and millers are already holding onto their crops as prices continue to rise. Exporters who had entered supply deals with foreign buyers are now trying to find a way to compensate their customers because they can't physically get hold of the rice, he says.

-- The problem worsened after Thai Commerce Minister Mingkwan Saengsuwan predicted last week that rice would soon hit $1,000 a ton and encouraged local farmers to make the most of the situation.

online.wsj.com/.../SB120691294229075241.html

April 3, 2008 7:22 PM

mollysimon said:

sdmuth:  Both your posts were fascinating.  Not sure how much you know about GMs, but I'm wondering whether you could answer this question:  What are the dangers of these foods?  I've heard that the possibility of wiping out other plant life is a possibility.  GMs, from what I've heard, have a bit of the dginn-out-of-the-bottle factor, though perhaps I've been listening to the organic food nuts (I'm a bit of one myself) who are suspicious of new-fangled foods.  

April 3, 2008 7:24 PM

cthulhu2008 said:

biofuels biofuels, biofuels...

April 3, 2008 7:26 PM

sdemuth said:

MollySImon: Entire doctoral theses have been and are being written on your question, so I'm not likely to answer it to your satisfaction here.  But a good starting point is to assume that the people pushing GM for a profit are hopelessly underestimating the risks, and the wingnuts predicting the end of the world are equally hopelessly overhyping them.  GMOs are not likely to to prove terribly dangerous to their consumers in an acute sense, but I'd say the jury is out on whether there are long term risks to consumers.  Compared to other environmental risks to individual health though, I'd bet on these being small.  Frankly, the fact that Archer Daniel's Midland learned 30 years ago how to make cheap sugar (high fructose corn syrup) out of corn will probably kill more Americans through diabetes and other obesity related disease than all the spliced genes we'll see.

Out in the larger world,  depending on the genes you splice into them, GMOs could be dangerous to the ecosystem or benign.  There are no obvious frankenfoods out there, but a collection of genes that make a plant super-hardy and super-productive could end up in wild relatives and create new, disruptive weeds.  Splicing in insecticides could backfire by wiping out desirable and necessary insects in some areas.

The real risks in my mind are more prosaic, however: moving toward a GMO dominated agriculture just accelerates the mono-crop, mono-variety mania that already characterizes modern agriculture.  Genetic diversity WILL suffer, and new habitats WILL be made arable and thus destroyed as habitats by novel new varieties.  

For my part, I think carefully applied genetic modification could be a net boon, but the current regime is poorly regulated, and poorly thought out (mostly for short term financial gain by Monsanto et al.)  So I'd anticipate some real boondogles - at least on the scale of the kudzu invasion of the southeast, or the zebra mussel debacle in the great lakes region.

April 3, 2008 9:30 PM

fougasseu said:

Finally a post mentioning Archer Daniel's Midland. As the Congress continues to parade overpaid and overweight CEOs into hearings - I love it - we get to see the face of Crony Capitalism and hear how it works from the guys who make it work. In the last few weeks we've seen the robber barons from Wall Street, the airlines, the telecoms and so on squirm behind the microphone.

Let's hope they get around to ADM and Monsanto fairly soon.

Good for the country, bad for McCain to see all of these aging plutocrats before the cameras.

What could be better?

April 4, 2008 8:25 AM

butchie b said:

Wait, a Dem is going to rag on ADM?  As if being in the pocket of Big AG isn't the most bipartisan notion of all.  YGBSM.  The Dems suck up to these clowns just as much as any GOPer.

What sdemuth said.

April 4, 2008 11:17 AM

luispc said:

"Wait, a Dem is going to rag on ADM?  As if being in the pocket of Big AG isn't the most bipartisan notion of all.  YGBSM.  The Dems suck up to these clowns just as much as any GOPer."

Very precise Butchie. I love this old-fahioned, distinctively American way of putting things. In it lies one of the main reasons for keeping my hopes high (beware "overpaid and overweight CEO's"!....your days are ending...with a genuine American spirit, which can be gisted as "no bullshit!", your days are ending sooner rather than later...)

And in what concerns the coming election, it's only a piety that no chance was given to the only candidate that actually articulated a speech of "emancipation" from these moguls (yes, Edwards...). In what concerns Hillary, I'm affraid they're all in her "prayer group". And in what concerns Obama, well, he'll be very much worried inventing soundbites and thinking about things such as abortion, gay marriage, gender, race, cats and dogs, to even care for what is actually fucking Americans...

April 4, 2008 12:17 PM

luispc said:

On cats and dogs, don't misunderstand me. I think that the cats should have a "right" to marry dogs if they wish to, the same going for dogs that want to marry cats (and girafs, and elephants, and...)

April 4, 2008 12:22 PM

luispc said:

I just wonder why Oprah hasn't thought about this, thus improving her very sensible audiences through the exploration of exhibitionist animals being deprived of their basic wishes... This is a most grave failure (everything else and everyone else has been explored there...)

April 4, 2008 12:26 PM

mollysimon said:

Thank you sdmuth.  The genetic variety argument is especially obvious when you go to the supermarket.  I no longer buy my tomatoes there.  They're firm all right, and taste like plastic.  And as you point out, that's the least of it.  

April 4, 2008 12:59 PM

scrubbyoak said:

luis:

From your many great posts, it's obvious that you're curious-minded,  thoughtful, not to mention your civility  and not given to rude or snide remarks.

So, what is it about you when it comes to Obama? Ignorance, disdain? Or maybe his glib style turns you off?  

Must be the glib style because there's very little difference in substance between him and Edwards. By the way, Edwards agrees, though he thinks Obama doesn't have the toughness it'll take to fight the battles of "emancipation" from these moguls.

April 5, 2008 9:20 AM

teplukhin2you said:

It's Obama's starstruck groupies who are so annoying. The guy himself is nice enough. Means well, gives good talk.

April 5, 2008 11:03 AM

luispc said:

"So, what is it about you when it comes to Obama? Ignorance, disdain? Or maybe his glib style turns you off?"

I don't think it is ignorance, Scrubbie. Perhaps, his "glib style" annoys me a little.

But my main problem, if I can correctly articulate it, has to do with the easiness in which he is able to capture the imagination of people without providing real substance. That's a dangerous political tool, I think.

I think that his main "trumph" lies in his grand declarations about uniting the "divided America". But what is that precisely? Contemporary America, I know, is divided by an aggressive conservative speech that likes to distinguish the friend and the enemy, the "good guys" and the "bad guys" through very ugly misrepresentations of the later. And it would be very good if that sort of politics ended...

But simultaneously one cannot base one's entire political appeal on that. Since, if overcoming of divisions is a good thing, one has to have a point of view in which that overcoming can happen. And Obama, either hasn't a point of view in this sense or is hiding it...

On really divisive issues, in which hard choices have to be made (from facing or not globalized markets to credibly facing the Middle East problems - since these won't go away with Bush -, from how America is to relate with China to rethinking some culture issues such as abortion and gay marriage) there aren't really any substantive answers given by Obama as far as know. Only evasive soundbites that are actually a cause for great concern (if he does not want to hostilize Iran, how far is he willing to accept being hostilized?; if he is "inspired" by this or that one on this or that cultural issue, what exactly does he think about it?, etc., etc.)...

At the last level there isn't really a declared ideology animating his thought and political practice. Everything is a reflection of the current age of "case by case" pseudo neutrality, which is an hoax since that sort of neutrality is not possible. Choices have to be made from a defensable point of view that one is brave enough to present and defend.

Not only he reflects this absurd age of neutrality, he also reflects some grim aspects of this absurd age of morally unframed sentimentality (something like an American male Diana...). And that really turns me off. Politically this is nothing but an "illusionist trick" even if the illusionist himself doesn't know he is a manipulative illusionist...

Anyway, I'm very much isolated in this judgment. Generally the European media is charmed with the man.

April 5, 2008 11:23 AM

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