Rice, Price (Economic) Surprise!

THE YEAR 2007-08 is remembered for the Global Financial Crisis, starting with the collapse of Lehman Brothers. Not many remember that during the same time period, the world had also seen a rice crisis. Yes, a crisis in the humble foodgrain that hardly gets noticed or spoken about.

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After increasing slowly and steadily from historic low prices, the world rice prices tripled in just six months during 2007-08. The international trading price of rice moved from $300 per tonne to nearly $1200 per tonne in just a few months. On the other hand, some sections of the global rice farming communities – especially those with large farm holdings and with market connects for distribution – benefited from the higher prices. On the flip side, farmers who had planted more rice crops when prices were high and ended up harvesting them when the prices crashed, incurred losses.

The biggest trigger for this crisis started with Vietnam banning rice exports. Other nations including India, China and Cambodia, quickly followed suit with rice export bans effectively shutting down the global rice market. The outcome was sheer panic. For example, the Philippines ended up buying as much rice in four months as it usually imported in a full 12 month cycle! The global importer community went into a tizzy and within a week, rice prices in the global markets had doubled. Some nations saw, and even indulged in, panic buying, and social unrest issues occurred due to high prices in the domestic retail markets.

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