Observers of the rice market worry that there could be a repeat of the food crisis of 2008. If there is, prices could soar from current depressed levels.
In 2007-08, a combination of export restrictions from major rice-producing countries and speculative investment purchases caused shortages of the grain. Consumers across Asia panicked, buying and hoarding whatever rice was available, while Haiti saw riots.
In the U.S., certain grocery stores limited rice purchases.
As the supply situation worsened, prices catapulted to more than $24 per hundred pounds by April 2008, from about $13 near Thanksgiving 2007.
This time, prices have been on an almost continuous slide for the past 17 months, discouraging growers even as demand increases. Rice is trading around $10 per hundred pounds, down nearly 40% from the end of 2013.
“Current levels of supply against demand are very similar” to the food crises of 1972-74 and 2006-08, says Shawn Hackett in a recent edition of the Hackett Money Flow Report.
The stocks-to-trade ratio, a measure of how much rice is in storage relative to how much is shipped around the globe, is 225%, a tad lower than the 233% seen in 2007-08 when prices started to surge, according to the Firstgrain Rice Market Strategist newsletter. The lower ratio means smaller stockpiles.
“Rice production is projected at a new record,” the U.S. Department of Agriculture reported in May. But “consumption is forecast to surpass production for the third year in a row, drawing down stocks to the lowest since 2007-08.”
No comments:
Post a Comment