Why Rice is So Expensive

By Ricky Carandang

...With all these concerns about the health of the US economy, there’s been an exodus of portfolio money from US assets. As all this hot money goes out of the US, fund managers are looking for other places to put their money. And they’re going into commodities. They’ve seen how oil and precious metals have gone up and continue to go up. But with oil and gold hitting record highs, there’s a sense that the upside may be limited so they’ve focused on commodities that they believe could have a greater short term upside. And that means corn, wheat, soy, and rice.

Yes, there are real supply and demand factors driving up rice prices, but one must concede that a big chunk of the increases in the prices of oil, gold, and rice, are due to speculation on the international commodities markets.

But because gold is not a basic commodity, it can go up dramtically without too much of a ripple in the world economy. And yes, the global economy has proven pretty resilient in the face of rising oil prices because increased efficiencies in their use. For example, cars today are much more fuel efficient than they were in the 1970s when the last major oil shock rattled the global economy.

But a rapid and sharp rise in rice and wheat prices will have a dangerous impact on the world’s poor countries. The World Bank and the United Nations have raised the alarm on this.

The effects are being felt not just in the Philippines but all over the developing world. Western media is blaming supply and demand problems, and to some extent they are right. Governments like ours have lacked the foresight or the will or just never really cared about forward planning to ensure food security. So the government is partly to blame as well. But Western media is also glossing over the fact that much of this food crisis is due to unhampered speculation on the international commodity markets...

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So in light of speculative investing, after all, in the long run, is total free trade advantageous to economies striving to emerge?

Why do you think the USA is getting more aggressive now in promoting free trade than before?

Emerging economies should be very prudent in deciding what specific areas of their economies are they going to allow free trade.

An emerging economy entering into a total free trade agreement with a fully developed economy is like a wage-earner gambling poker against a casino.