Global rice prices.

cwfm

You don't have to look far without seeing some news concerning global rice prices hitting an all time high.

However finding companies that are reaping the rewards of these prices are so easy to find.

Some insight into this would be greatly appreciated.

1echidna

cwfm wrote: »

You don't have to look far without seeing some news concerning global rice prices hitting an all time high.

However finding companies that are reaping the rewards of these prices are so easy to find.

Some insight into this would be greatly appreciated.

I am assuming you mean "not so easy to find". It appears that large exporters of rice (like Vietnam) are limiting exports to keep prices low on their domestic market. Only a small proportion of rice is traded internationally, and that mostly in Asia, most is produced and consumed locally in China, India and other Asian countries. It is not capital intensive in its production or processing and it seems unlikely that there are any large companies quoted on stock exchanges making large profits out of it. The profits being made are probably going to the farmers who actually grow it ( unless of course they are subsistance farmers or, as may often be the case are in a region where the price is controlled) and as the amount traded is reduced by countries limiting exports the people involved in the international trade may not be making any more than normal.

purch

Rice is traded as both Spot prices and Futures contracts on most of the Commodity Exchanges in the Far East such as the National Multi Commodity Exchange of India Limited (NMCEIL) and the National Commodity & Derivatives Exchange Limited (NCDEX)

I don't know of any firms in London or Europe who offer retail customers access to these markets....I know Sucden don't and they would be the most likely.

meester

It is not that easy for you to speculate in these markets. People in developing countries may have an income of about $1 per day. Nearly all of this money is spent on food. Rice, which might have been $0.30/kilo is now double that. The price of palm oil is up hugely too. The result for us might be a 0.1% rise in CPI, but for the world's poor it is catastrophic.

Anyway, a lot of this rice is controlled by governments, and much is simply grown and consumed locally. I'm not sure the fundamentals justify large price rises, as the land dedicated to rice paddy is fairly well established, and TBH in the long-term, efficiency gains in production through increased prosperity in the Third World should outweigh the pressure caused by increased calorie consumption and population growth.

That said, there is a big trend towards commodities, just as there was to tech shares, then global property. Perhaps better to look to invest in a commodity that isn't already global headline news for the cost increases?

harryhound

cwfm wrote: »

You don't have to look far without seeing some news concerning global rice prices hitting an all time high.

However finding companies that are reaping the rewards of these prices are so easy to find.

Some insight into this would be greatly appreciated.

Has it occurred to you that the Planet has 200,000 extra mouths to feed EVERY DAY.

The majority of these mouths are probably trying to eat rice.

So perhaps nobody much is getting richer, we are all getting poorer as there is less available per head. If there is a "famine" the global economy makes sure it is the poor who starve.

BTW Wheat stocks are now at their lowest since WWII.

Harry.

It is interesting that during the Irish Potato Famine, the Irish tried to eat MORE potatoes, because they were still the cheapest food available - something similar is probably happening to rice at the moment. Ouch.

http://www.businessdictionary.com/definition/Giffen-good.html

http://gregmankiw.blogspot.com/2007/07/real-world-giffen-good.html

PS I would think that it is the highly automated rice farmers of California, that are booking a cruise, not the "coolie" up to his knees in mud. As rice is water hungry and the world is heading towards a water shortage, I would doubt that there is much land that can be turned over to rice production, in the short term.

meester

harryhound wrote: »

PS I would think that it is the highly automated rice farmers of California, that are booking a cruise, not the "coolie" up to his knees in mud. As rice is water hungry and the world is heading towards a water shortage, I would doubt that there is much land that can be turned over to rice production, in the short term.

This is the key point. Rice production in developing countries is often grossly inefficient, with a lack of basic fertiliser in many cases, but beyond that the use of back-breaking manual labour. Yields could increase massively with effective infrastructure

cwfm

Thank you for all your responces, some very interesting points.

harryhound

meester wrote: »

This is the key point. Rice production in developing countries is often grossly inefficient, with a lack of basic fertiliser in many cases, but beyond that the use of back-breaking manual labour. Yields could increase massively with effective infrastructure

I'm not sure that this is true, we already have had the green revolution of better seeds and most peasants have access to fertilizer. In fact the problem in SW Asia is that they have all insisted in planting some high yield variety that at high density is subject to pests and diseases.
The real problem is how do you clear the fertile land of all the surplus people. We realised over 100 years ago that there is no wage at which "a navvy can out perform a steam shovel" if you get my drift.
Stalin tried it in the Ukraine and became the last century's largest mass murderer.
Zimbabwe is trying the reverse manoeuvre and producing 1000 fold inflation.

Can I hear someone turning in his grave:
http://en.wikipedia.org/wiki/Malthusian_catastrophe

meester

harryhound wrote: »

I'm not sure that this is true, we already have had the green revolution of better seeds and most peasants have access to fertilizer. In fact the problem in SW Asia is that they have all insisted in planting some high yield variety that at high density is subject to pests and diseases.
The real problem is how do you clear the fertile land of all the surplus people. We realised over 100 years ago that there is no wage at which "a navvy can out perform a steam shovel" if you get my drift.
Stalin tried it in the Ukraine and became the last century's largest mass murderer.

I lived in Indonesia in a rural area, and while it's true that there is access to fertiliser, people owning a couple of acres of paddy field do NOT have access to tractors, they did the work by hand, it is far less efficient. The cost of a day's labour is $1 (and the landholder's labour may effectively be worth less than that due to high unemployment). Do the maths. How much do you think you would pay for a tractor to plough your field? If you owned 1000 hectares, then yes, you have machinery and low-paid workers to operate them, but most agriculture is subsistence level.

The amount of food produced in for instance the US is huge, but agriculture is certainly not the biggest employer as it is in the countries most affected by food prices.

Don't forget that in the past there was a belief the world would run out of food.

Quorn was developed in the 1950s as a result of this fear.

Since this time food has proved to be more plentiful than ever, global calorie consumption is up everywhere. And this in the context of world population more than doubling. It is thought unlikely it will ever reach double the current levels.

I don't see that food prices in the long-term should stay high. Technology will improve, countries will develop.

Why is it that Indonesia imports rice? It should not. It has a tropical climate with plenty of rain, fertile soils. On the fundamentals with a population heavily engaged in agriculture, there is plenty of opportunity for economic development and massive production increases.

The idea of a world population that has increasing demand for finite fossil fuel resources is easy to understand. The concept of us running out of rice is rather less so.

The UK is densely populated, but our tiny agricultural industry can provide much of our food needs

Hungerdunger

Personally I think there's something quite distasteful about seeking to profit from a situation which is likely to lead to mass starvation among the poorest people on the planet.

meester

harryhound wrote: »

I'm not sure that this is true, we already have had the green revolution of better seeds and most peasants have access to fertilizer.

Actually one statistic I recall is that there is more fertiliser used each year on Florida's golf courses than in the whole of Africa.

Apprently much of this is due to ecofascists who oppose fertiliser aid on ideological grounds.

It's easy for middle class Westerners to be snooty about mass-produced food, but intensive farming feeds the developed world extremely well, and could do so in the developing world as well.