High Prices for Staple Foods Dip, but Volatile Markets Persist
HONG KONG — After months of startling increases, the prices of rice, wheat, soybeans and several other foods have come down recently, a development that could ease some of the panic in global food markets.
Prices remain volatile and remarkably high by historical standards, and few agricultural experts expect the days of inexpensive food to return soon. There is no sign of a drop steep enough to make food affordable again for the hundreds of millions of people in poor countries who are struggling to maintain adequate diets.
Still, any price decline is welcome news for many countries, particularly those heavily dependent on imported rice.
The spot price of rice from Thailand has dropped by close to 20 percent in the last two weeks after nearly tripling in the first four months of this year. Rice prices on American markets have been rising this week, including a sharp increase on Thursday, but are still down 10 percent from their high on April 23.
Similarly, despite jumps in the last few days, contracts for future delivery of American wheat and soybeans are down markedly from their highs in March — by 34 percent in the case of wheat. The prices of canola oil and palm oil, two alternatives to soybean oil for cooking and food processing, are also down.
“The floodwaters have stopped rising, but the problem isn’t over yet, and prices could stay at this level a few years,” said Nicholas W. Minot, a senior research fellow at the International Food Policy Research Institute in Washington.
Agricultural markets remain deeply unsettled. For several years, farmers have been unable to catch up with rapidly rising demand for food and animal feed, and the world’s grain stocks have been falling. The situation peaked in recent months as prices spiraled out of control, setting off hoarding in many countries and food riots in at least 19 of them.
United States corn prices hit yet another record on Thursday, just above $6.30 a bushel, amid fears that rainy weather in the Midwest would suppress yields this summer. Most corn is not used for food; it is used for animal feed and, increasingly, for ethanol production. The high corn prices of recent years have prompted farmers to plant more of it, displacing crops like wheat and contributing to higher food prices.
Experts say that shoppers may not see much benefit from the recent price dips. Many retailers and wholesalers around the world had not yet passed the full extent of this spring’s price increases along to consumers.
The spot price of a heavily traded good grade of rice exported by Thailand peaked at $1,100 a ton in late April, with a few purchases at even higher prices by buyers demanding huge quantities. But traders said Thursday that the going price was $880 to $920 a ton, although buyers of large quantities could still expect to pay more.
“I don’t expect a crash in prices, but I think there is a correction,” said Ben Savage, the managing director for rice at Jackson Son & Company in London, one of the world’s oldest rice brokerage firms.
Rice is perhaps the world’s most politically fragile crop. Nearly half the world’s population depends on it as a staple food. An even higher proportion of the world’s poor people depend on it, as imported rice has displaced local crops in cities across Africa and the Caribbean over the last decade, even as the crop retained its primacy in Asia.
The latest rice prices are still far above the price of $385 a ton prevailing in mid-January, and even further above the 2003 price of $200 a ton. Even with the slight decline in prices, the cost of rice remains high enough to put considerable strain on poor families in countries like the Philippines and Nigeria, the world’s two largest rice importers.
“The market has been a buyer’s market for 40 years and recently it switched to being a seller’s market, particularly in the last few months,” said Vichai Sriprasert, president of the Riceland International Company in Bangkok.
While rice prices have fallen in recent days, global rice consumption remains greater than production, he said, adding, “It will remain a seller’s market for years to come.”
The recent cyclone in Myanmar, formerly known as Burma, heavily damaged rice fields there and sent rice prices soaring in the country. But rice traders said this had not pushed up world prices because Myanmar’s exports were tiny and the country and aid agencies lacked the money to buy large quantities of rice on world markets.
“I don’t think the Burmese cyclone is having any significant effect,” said Korbsook Iamsuri, the secretary general of the Rice Exporters Association in Thailand.
Experts cite a range of reasons for the dip in commodity prices. Traders said that some speculative money might be moving out of agricultural commodities, putting downward pressure on prices. Additionally, it is clear the price spikes of recent months suppressed some demand. And the increases encouraged farmers to plant more crops on land that is marginally fertile and not worth farming when prices are lower.
Moreover, rice exporters, after clinging to inventories as prices climbed rapidly, have begun to sell. Many Thai rice exporters bet on continued increases in rice prices by building up large inventories with borrowed money, but they are now struggling to meet interest payments on their loans, said Mr. Vichai, the president emeritus of the Rice Exporters Association in Thailand.
“Now that every one of us has overstocked ourselves, then when there’s a sign that prices have overshot, we all get excited” and become more willing to sell, he said.
The government of the Philippines, the largest rice importer, has played a role in the turnaround in market sentiment. Receiving only one bid for a rice tender on Monday, the government decided it had enough rice in its stockpiles and would wait until prices fell before buying more.
“We currently have a sufficient supply of rice and are only looking to import supplies to further strengthen our reserves,” the agriculture secretary, Arthur Yap, said in a written reply to questions. “Given this flexibility, we will only purchase from the international market when the price and other terms are suitable, and in this instance, we decided to defer the process and to wait for a better price.”