I Am Very Tall

For those of you that don't pay attention to these things, the price of rice has shot through the roof, leading to global panic at the specter of mass starvation. To give some measure of "through the roof," a ton of rice cost $375 in December. As of April, the same amount costs $1,100. How big of a deal is this? Americans can no longer buy more than two 20lb bags of rice at a time at their local Sam's Club. Yeah, it's just that big.

Interestingly enough, this has not been sparked by any sudden rise in rice consumption, nor in a sudden drop in production. From Tom Slayton and C. Peter Timmer:

Why is there a world rice crisis at all? There is no single reason, but panic and hoarding are playing a big role. World rice production in 2007 was at an all-time high, with forecasts for 2008 to set another record. The world’s rice consumers have not suddenly started eating more rice. World trade has not collapsed—the volume of exports in the first four months of 2008 was about 20 percent higher than in the same period in 2007. And world rice stocks, excluding those held by China, have been steady the past five years. These trends do not look like an impending crisis, and yet world rice prices have exploded.

Thus the trebling in rice prices is driven to a greater degree than other commodities by panic and hoarding. These were precipitated by sudden export restrictions in India, which were stimulated by events in other commodity markets, especially wheat, not from local shortages. (Facing a parliamentary election in May, 2009, the Indian government does not want to face further criticism over additional wheat imports—thus rice exports needed to be curtailed to maintain supplies for the public food distribution scheme.) These export restrictions spread to other suppliers and lead to urgent efforts by rice importing countries to secure supplies—at any price—in a thin global market. It is no accident that most of these countries face elections, and
food price inflation is extremely unpopular. Rice has returned as the “political commodity,” even in relatively affluent Asia. The result: the extraordinary price rises we have seen in recent months, even though the underlying fundamentals support only modest price increases.