Re: Why does Cambodia use the middlemen, Thailand and Vietnam, to tranship and export rice to international markets?
- From: Chim <ChimS1@xxxxxxx>
- Date: Fri, 25 Apr 2008 16:46:11 -0700 (PDT)
On Apr 25, 6:15�pm, Chim <Chi...@xxxxxxx> wrote:
Behind the Run on Rice By Pallavi Gogoi
Fri Apr 25, 8:08 AM ET
At the Costco in San Francisco, rice is all the rage. Not long after
the 10 a.m. opening on Apr. 24, the warehouse club was well on its way
to selling out the day's supply of Thai jasmine rice. Within an hour,
customers cleared three pallets loaded with 50-lb. bags of Super Lucky
Elephant brand jasmine rice from Thailand. Real estate broker Mary
Jane Galviso snapped up two bags -- the limit imposed by this
particular store. "This is very frightening," says Galviso, who hails
from Orosi, a rural community in California's Central Valley, more
than 200 miles southeast of San Francisco. Her local grocery, which
specializes in Filipino foods, has run out of Thai jasmine.
In a dramatic development for U.S. consumers this month, shoppers and
Asian and Indian restaurant owners started panic-buying two of the
highest-premium varieties of rice -- Thai jasmine and Indian basmati.
That led many grocers to run out of the rice, and warehouse clubs
including Costco and Sam's Club imposed limits on how much rice
shoppers can buy.
The restrictions placed by Issaquah (Wash.)-based Costco
(NasdaqGS:COST - News) vary across the country, while Sam's Club, a
division of Wal-Mart Stores (NYSE:WMT - News), limited its customers
to four 20-lb. bags of rice. "We've heard of cases where restaurant
owners are hoarding three weeks' supply of rice in their basement,
which is obviously more than they currently need, which makes the
situation even worse," says Richard Galanti, Costco's chief financial
officer.
Record High Prices for Rice
In a statement Apr. 24, Sam's Club said its rice limits "are designed
to prevent large distributors or wholesalers from depleting our stock.
We believe limiting rice purchases to four bags per visit is
consistent with the needs of the majority of our members, including
many restaurants . We will continue to work with our suppliers to
manage inventories to meet demand."
The rice rationing in the U.S. comes as the torrid pace of commodity
price increases has led to violence over food supplies and costs in
several nations. Globally, rice prices are starting to hit record
highs, following a host of other commodities. However, experts are
clear: There's currently no shortage of rice. "Vietnam and Thailand
have had record rice crops in the past year, and India too has had
bumper crops," says Nathan Childs, a senior economist who follows the
global rice market at the Economic Research Service of the U.S.
Agriculture Dept.
Instead, what's driving the price of rice so high are widespread
worries about food inflation in many rice-growing nations. "In poorer
nations, a large share of people's earnings is spent on food, and big
price increases in other kinds of food are harming consumers," Childs
says. So to protect their supplies of rice -- a staple food in much of
the world -- several countries have imposed export bans or sharp
limits. That has led to a sharp reduction of rice available for trade
in the global market. In 2007, India and Vietnam, two of the world's
biggest rice exporters, reduced their rice shipments. Since then,
Cambodia, Egypt, and Brazil have all halted rice exports. And many
observers worry that Thailand, the world's largest rice exporter,
might jump on the bandwagon.
Lots of Action in Rice Futures
Prices have soared to eye-popping levels in recent weeks: U.S. long
grain rice has doubled, to $800 per ton. Indian basmati rice prices
are up 182%, to $2,400 a ton, so far in April, compared to $850 per
ton a year ago, while Thai jasmine has more than doubled in price
since last year, from $559 per ton to $1,125.
The runup has been especially sharp since January, when Thai jasmine
rice was trading at $625 and basmati at $1,300 per ton, respectively.
At the Chicago Board of Trade, rice futures have historically been one
of the most thinly traded contracts.
However, with rice futures gaining 80% in the past year to $24 per
hundredweight, the contract is seeing a lot of trading lately. (A
hundredweight is the equivalent of 112 lb.) "I've never seen a rice
market until this year in my three decades of trading grains," says a
shocked Tim Hannagan, senior grain analyst at Alaron Trading in
Chicago.
Allegations of Global Rice Hoarding
The outlook appears grim, especially for nations that are net
importers of the grain and that have large rice-consuming populations,
such as the Philippines and Iran. A recent international auction
offers one glimpse into how tight the global rice market has gotten
this year. On Apr. 15, according to the Agriculture Dept.'s Childs,
the Philippine government tried to buy 500,000 tons of rice in the
global market but managed to get only 320,000 tons, leading several
rice trade groups to contend that producers are hoarding rice to see
how much higher prices will rise. That news sent a jolt through
wholesale marketers around the world.
Restaurants and consumers in the U.S. followed suit last week and
started buying up their own future rice requirements. The Philippine
government has announced that it plans to enter the rice market for
another 100,000 to 600,000 tons. If it can't find the rice it wants to
buy, that could signal a true crisis for the staple at a time when the
world is already gripped by concerns about food prices and supplies of
other staple products such as wheat and meat.
Aromatic Rice's Recent Gain in Popularity
Jasmine and basmati are both known as aromatic rice, because of the
special aroma they emit while cooking, an attribute that has proven
difficult to duplicate when grown in countries other than their
origin. Because of this quality, they have always commanded
substantially higher prices than other varieties of rice. Basmati is
grown in India and Pakistan, while jasmine rice comes from Thailand.
Their consumption in the U.S. has grown exponentially in the past
decade, while overall rice consumption has kept pace with U.S.
population growth, rising a mere 2% or so annually in the past decade.
Imports of jasmine rice from Thailand grew 78% in the last 10 years,
to 394,000 metric tons in 2007, while basmati imports in the same
period grew 112%, to 71,000 metric tons in 2007, according to the
USDA. While both types are sold in India and Thailand, these highest-
premium varieties are rarely consumed in their native countries and
are produced mostly for export to Britain, the Middle East, Hong Kong,
Canada, the U.S., and Singapore.
Clearly, consumers like California's Galviso prefer Thai jasmine rice.
Her family eats rice at three meals daily and prefers the jasmine
variety, calling it "the prized one, because of its smell." On
Thursday, Galviso was willing to detour into Costco despite her
several-hour commute into San Francisco, where she works. Still, to
keep costs in check, she has resorted to mixing jasmine with other,
less expensive varieties.
San Francisco's Costco sells 50-lb. bags of jasmine rice for $21.99,
while other stores sell the same rice for about twice that. The
company is trying to satisfy customers' demand for rice while keeping
prices in check. It's anyone's guess how long the company can continue
walking that fine line. "With every single truckload, the price goes
up," says John Booth, a regional operations manager, who adds that he
hasn't seen such great demand for rice in his nearly 22 years with the
company. "We're seeing prices increase daily."
Cambodia needs to increase the cultivation of Jasmine rice for direct
export to international market, mainly the US and EU, to improve
currency exchange, redirect the cash flow to Khmer farmers and at the
same time possibly to lift the poor people out of poverty. This is a
situation that one stone can kill 2 birds. The first one is to end
poverty in Cambodia. The second one is to fulfill the new surge in
demand for Jasmine rice which has a special flavor and it can only be
cultivated locally in Thailand or Cambodia.
Jasmine rice is mostly packaged under Thailand's trademark. This may
happen because Cambodia lacks trade facilitation, logistics and direct
export contract with companies in the US and EU. This kind of shortage
is a challenge that Cambodia can move in to fill the gap and use it as
an opportunity to increase export revenues, just like garment and
tourism industries.
.
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