Agricultural and Food Policy
 Agri Outlook Radio
Number 158
Why are rice prices so high and why are rice consumers from parts of the Caribbean,
to Asia, to Africa angry and/or even rioting over rising rice prices?
Part 2: A case for strong demand for commodities (2:41 minutes)
Audio/Video Script:
Dr. Bobby Coats
Extension Economist and Professor
University of Arkansas, Division of Agriculture
Despite the global economy’s
negatives there is more right than wrong economically and politically in the
world. There are 3-billion plus Asians and others whose increasing standard of
living will grow the global economy and demand for commodities beyond most if
not all expectations.
We must understand that countries have, do, and will protect their
agricultural sector – hence their food, and especially rice. One only discusses
the degree of protection. Keep in mind a country’s ability to engineer adequate
protection of their food sector while meeting or attempting to embrace expanding
global trade commitments is difficult. Protectionism up to this point has
limited rice price strength. Now governments are limited in their ability to
manage price, due to tight global stocks, dollar weakness, continued global
growth, inflation, and the emergence of a bull market in commodities with heavy
speculative activity.
In a world filled with risk and uncertainty rice has real value to
governments and individuals. The world is and always will be volatile,
dangerous, and unpredictable, so food security is high on most country’s
priority list of security concerns. Think not? Then try discussing open trade in
rice with developing countries China and India, or for that matter developed
countries Japan and South Korea.
In general commodity prices for the past three decades have been moving
sideways in a channel. Over the decades rice prices would revisit previous lows
and highs. Rice prices were reasonably predictable. U.S. rice producers remained
profitable by increasing their efficiency, productivity and/or somehow keeping
there per unit costs competitive. For many U.S. producers a key factor in
keeping per unit costs competitive required they subsidize their operations with
off-farm income.
This has been Bobby Coats Extension Economist University of Arkansas Division
of Agriculture.
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Food Policy Radio
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