October 28, 2008
By Liza Lin and Paul Gordon
Bloomberg

Demand for rice will increase because the economic slowdown will force poor people to eat more in place of meat, said Robert Zeigler, director-general of the International Rice Research Institute.

Photo: A combine makes its way through a rice field on a farm in Gaggiano near Milan, Italy, on Sept. 19, 2008. (Giuseppe Aresu/Bloomberg News)

Increasing consumption will keep pushing up prices, he said in an interview with Bloomberg Television today.

Rice, the staple food for three billion people, climbed 29 percent in the past year to $15.38 per 100 pounds. The price reached a record $25.07 on April 24 as Vietnam, India and Egypt curbed exports to protect domestic stockpiles and cool prices. The gains contributed to food riots from Haiti to Egypt.

``When the global economy is in recession, buyers get more frugal,'' said Kiattisak Kanlayasirivat, Managing Director of I.C.C. Trading (Thailand) Ltd., which sells rice to Africa. ``They will likely turn to rice as it's cheaper than meat.''

The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries, analysts say.

``The price has been rising steadily'' since 2000 because ``we've failed to invest,'' Zeigler said. ``The financial crisis suggests we may not turn those investments around and that leads me to the inescapable conclusion that upward pressure'' on prices will continue, he said.

MORE HUNGER

The number of hungry around the world is at risk of increasing as the lending slump cuts investment in agriculture and crops, according to Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains at the United Nations Food and Agriculture Organization in Rome.

``If fertilizer remains expensive and importers are unable to get credit to buy it, that has an immediate impact on production,'' said Zeigler from the Philippines-based institute. ``If credit is not available for infrastructure, such as maintaining irrigation, the long-term impact is very negative.''

Thailand's benchmark export price of white rice fell 36 percent from a record in May to $664 a metric ton last week, according to the Thai Rice Exporters Association. The price is almost double the average $336 a ton in October last year.

Still, supplies have been increasing in producing countries as farmers plant more in response to rising prices.

THAI SALE

Thailand, the world's biggest exporter, may sell rice from state reserves at a loss because it must empty warehouses before the next crop arrives, Commerce Minister Chaiya Sasomsup told reporters Oct. 24. The country began stockpiling rice earlier this year to secure supplies as prices reached records.

Vietnam, the second-largest shipper, has proposed slashing export duties to zero, Hanoi Moi newspaper said Oct. 21, citing an unidentified official. The country imposed a tax on exports in July on concern there would be a shortage.

Indonesia may export as much as 2 million tons of rice in 2009 as production increases because of better seeds, Agriculture Minister Anton Apriyantono said in an interview Oct. 13. That would be the most in at least 50 years, according to U.S. Department of Agriculture figures.

To contact the reporters on this story: Liza Lin in Singapore at llin15@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601087&sid=aGycwFII6zOc&refer=home