7/31/2019 RT Vol. 9, No. 3 Hidden treasure

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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