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Go to
the Internet and google on “world rice shortage.” Most
of the web sites carrying information about a shortage
of rice is from our own local newspapers. However, a
potential shortage of reasonably priced price is
affecting communities from “Kansas to Kabul,” as one
newspaper in Bangladesh described the problem.
Quoting
from Asia News Network, the web site independent-bangladesh.com
perhaps summarized the cause of the problem the best:
“Worldwide, economists are worried that the diversion of
agricultural land and certain crops to biofuel
production is cutting into grain and cereal production
for human consumption. The prices of rice and wheat are
linked.” That last sentence is the key to the issue,
something our local politicians have failed to
understand.
Wheat
prices are going to historic highs and will continue to
climb. The best barometer of future commodity prices is
the futures exchanges in the United States. There, the
contract price for December 2008 delivery is higher than
the current March 2008 price, forecasting rising prices
through the end of the year.
And if
wheat prices are to continue going up, then you can be
sure that rice prices will track the wheat price trend.
I wrote
in this column that one of the reasons we are not able
to produce enough rice in the Philippines is government
interference in the free-market system that would have
allowed farmers to sell rice at a high enough price to
invest in agricultural infrastructure.
While
there is still a large group of people that believes the
government is the answer to all problems, in fact, the
government usually creates the problems that private
enterprise must solve. Thirty years of government
intervention in rice production has not solved the
production problem.
National
governments did not build the rail systems of Europe and
the United States in the 1800s; private companies did.
The Philippine government gave the nation the Philippine
National Railway. Any chance that private enterprise
might have done a better job? Globe, Smart and Sun put
phones in 20 million Filipinos’ hands, not Malacañang or
Congress.
And the
interference of the US and European governments in the
free market is what will drive rice prices up in the
Philippines.
From the
Environmental News Service: “The world is facing the
most severe food-price inflation in history as grain and
soybean prices climb to all-time highs. Wheat trading on
the Chicago Board of Trade on December 17th breached the
$10-per-bushel level for the first time ever. In
mid-January, corn was trading over $5 per bushel, close
to its historic high. And on January 11th, soybeans
traded at $13.42 per bushel, the highest price ever
recorded. All these prices are double those of a year or
two ago. In Mexico, corn-meal prices are up 60 percent.
In
Pakistan,
flour prices have doubled. China is facing rampant food
price inflation, some of the worst in decades.” Why? At
least “28 percent of the projected 2008
US
grain harvest” will be used, not for food, but for fuel,
biofuels.
If you
subscribe to all the environmental hysteria, you might
think that using biofuels is a good thing. But consider
the consequences. “Projections by Profs. C. Ford Runge
and Benjamin Senauer of the University of Minnesota four
years ago showed the number of hungry and malnourished
people decreasing from over 800 million to 625 million
by 2025. But in early 2007, their update of these
projections, taking into account the biofuels effect on
world food prices, showed the number of hungry people
climbing to 1.2 billion by 2025. That climb is already
under way. The UN World Food Program (WFP), which is now
supplying emergency food aid to 37 countries, is cutting
shipments as prices soar. Whereas previous dramatic
rises in world grain prices were weather-induced, this
one is policy-induced.”
The
reason for the dramatic rise in grain prices is
government intervention. In an attempt to reduce the use
of crude oil coming primarily from the Middle East,
Western governments mandated the use of biofuels,
savagely interfering in the free market. But these
governments took one more disastrous step toward food
scarcity. They subsidize the noncompetitive price of
ethanol-based fuel. Because of government subsidies for
biofuels production, corn farmers in the United States
and in other countries can make more and more profits as
the price of oil goes up.
We may
think of rice as rice, meaning that rice prices live in
a world of their own, controlled by the dastardly rice
cartels and smugglers. Prices of basic food commodities
are all connected. The free market allows adjustment in
all countries.
In
India, wheat and rice are almost equally important in
the diet. Yet, because of rising wheat prices, Indians
are eating more rice leading to higher prices. And the
fact is the price of wheat, as with corn, is
artificially high because of the artificial demand
created by bad government policy.
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