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Friday, 9 January 2009

Rice prices set to surge

MANILA - RICE prices are likely to rise sharply for the second straight year in 2009 as the global economic slowdown hits farmers and consumers alike, the International Rice Research Institute warned on Friday.

The worldwide credit crunch will make it hard for farmers to secure cash to purchase essentials such as seeds and fertiliser, the Philippines-based body said in the latest edition of its quarterly journal 'Rice Today'.

At the same time, it added, the economic downturn may increase demand for rice in developing nations as falling income forces poor people to switch back to less expensive staples.

The price of rice - a staple food for half the world including nearly 700 million poor Asians - spiked to 1,080 dollars (S$1,595) a tonne last April, triggering fears of social unrest.

It slid to about 575 dollars six months later due to record production and the early effects of the economic slowdown.

However, the institute warned, 'production uncertainty due to tight credit and declining rice prices combined with strong demand growth points to another rise in rice prices in the coming months'.

'Price volatility will remain high.'

Even if they had the cash, farmers burned by the sudden plunge in commodity prices 'will likely play safe and reduce input for their 2009 crops'.

The institute pointed to a decision by the Philippines government to lower its 2009 rice output estimate by almost four per cent, and said a similar move from other rice producers 'is likely in the near term'.

While global rice output reached record levels for each of the last four years, this was achieved through increased acreage and obscured the key issue of declining growth in rice yields owing to reduced agricultural investments since the early 1990s, the IRRI said.

As the world consumed more rice than it could produce in five of the last seven years, it forced governments to dip into their reserves to make up the shortfall.

Historic low levels of rice stocks contribute to the volatility, it added.

While rice prices have dropped from their 2008 peaks, the IRRI said, 'they are still high relative to 2007 levels, and are likely to remain too high for millions of poor.

'If the yield growth rate does not improve, we can expect rice prices to continue to rise, and at a faster pace than that seen since prices started moving up in 2000.'

The institute said the only solution was to boost rice yield growth through higher investment in research, and developing agricultural infrastructure to allow rice farmers to put new scientific breakthroughs to work. -- AFP

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