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7/31/2019 RT Vol. 9, No. 3 Hidden treasure
1/1
5Rice TodayJuly-September 2010
Hidden Treasure*
In the last ew months, I have visited Colombia,
China, Singapore, the Philippines, and Panama.
One thing I consistently heard during my
travels was that the world is changingand
its changing on many levels. One o these changesconcerns the weather, which has grown more
unpredictable. It would probably be better to leave the
grand debate about global warming to the politicians
and scientists, but the simple act is that great shits
in the climate cycle are occurring and this troubles
everyone. In Caliornia, or example, I had originally
planned to write an article on drought-related arming
issues ollowing years o dryness in the state. But,
by the time I got to writing, I had to change it to a
report on the eects o the late wet season on the
crops (see page 11). Interestingly, a massive reductionin Caliornias crop will be caused by this cold, wet
weatheralong with a urther 5% drop in output
because o water sales that would result in no crops
being planted on some armlands. This is the ate o
humans. We cannot control the weather any more than
we can stop the world rom turning.
Similarly, there is talk o the all-important (at least
in terms o political and trade sentiment) situation
in India and its upcoming monsoon. The Indian
government had been rather brilliant in keeping
stocks beore the major drought happened last year
and then holding on to the hope that this year would
allow them to bounce back. I the monsoon proved to
be better this time around, they would have pulled o
one o the most interesting and riskiest plays on ood
storage in recent history. I not, the pundits (airly or
unairly) would come out with economics showing that
more buer stocks are needed or a country as large as
India and how this would impact uture ood storage
strategies. But, given the prediction that a perect
monsoon is coming, perhaps everything will work out
ne. For the people o India and the world, we pray
that ood production stays at a level that can meet allneeds. As stated above, humans do not control the
weather and predictions can be quite dangerous.
China is another point o interest. There has always
been a belie that, at some point, China would need
to import rice to eed its large population (around
1.3 billion). It has already imported other ood
commodities such as corn (maize). When China (or
India) buys large quantities, the question becomes
one o how a 30-million-metric-ton global rice trade
* The opinions expressed here are those o the author and do not necessarily refect the views o the International Rice Research Institute.
deals with countries
that have internal
consumptions that
are several times
the size o globaltrade. The initial
response would be
to have them eat
other ood commodities (wheat, corn, etc.). However,
economics would question whether consumers will
or can easily shit between ood items. But then again,
would they have a choice since the export system o
rice is yet to be ully developed? This is the crutch o a
global ood business that looks oversupplied and yet
keeps 1.02 billion people on the brink o starvation by
not allowing this oversupply to reach the people whoneed it. Food may not be as abundant as we all think.
Having said all this, the worldpolitically and
in the tradehas sent ood prices alling this year
and one could question whether this is indeed a
refection o the reality that is mentioned above.
Market sentiment currently rules, as the ve major
rice exporters already reveal 5% more trade this year;
yet, nancial issues acing Europe, plus the changing
currency rates, reveal a hesitancy that dogs ood
markets. Such volatility can be harmul to longer-
term investments in ood output. There is no doubt
that such investment decreases would also impact
research. While all o us would like cheap ood so that
the developing nations can eed their people with
ease, one cannot orget the long-term issues i prices
are too low (lack o investment as seen in lengthy
periods in the 1990s until the ood crisis o 2008). It is
the old economics lesson coming back to haunt us.
The solution or low prices is low prices as this leads to
a all in supply (scarcity). Subsequently, when prices
rise, the solution or high prices is high prices, as this
delivers the investments needed to raise supply. In the
end, one should probably ear low prices more thanhigh prices as the world could once again lose ocus o
the idea that, without an ample ood and water supply
markets quickly realize the value o all things scarce.
Jeremy Zwinger
Publisher