Speculative hoarding already causing
rice shortages and rationing in Thailand?
By Jon Fernquest |
The Bangkok Post's Friday editorial reviews what's happening in Thai rice markets.
The editorial questions whether the optimal profit maximizing strategies of certain large agribusinesses might conflict with national food policy.
National food policy is defined as: "protecting the right to access the plentiful food supply on a dependable, affordable basis."
The market for rice in Thailand is surely very complex.
Standard prices that many never question, particular farmers more concerned with producing their crop rather than marketing it, may not have been adequately attended to recently.
Economists would surely require further proof that certain powerful market players are, in fact, manipulating the market.
If the market for rice is so easily manipulated by middlemen then the next natural question is what can be done to fix this?
Here is Friday's editorial in full:
EDITORIAL
There is rice in the fields
Friday April 11, 2008Because Thailand is one of the world's biggest food exporters, the country is never going to suffer a food shortage. But the same cannot be said for the Thai people, who may suffer shortages and worse.
Making sure that all Thais receive access to good food all the time takes an organised and committed government. There is hardly a more important job for any administration. One has to excuse the country for wondering in recent days if the current government is up to the task of protecting the right to access the plentiful food supply on a dependable, affordable basis.
The inscription of King Ramkhamhaeng refers to Sukhothai, but it has applied for centuries to all regions of Thailand: "There are fish in the water and rice in the fields." Thailand has suffered wars, natural disasters, floods and drought. But throughout history, Thais have never faced starvation.
It is curious, then, that the past week has seen instances of near-panic buying of food, particularly rice. In some markets, the staple disappeared, while in others merchants actually rationed sales. Everywhere, prices shot up, in some cases doubling in less than two weeks. Because there is neither excessive demand nor diminished supply, forces are at work outside normal market mechanisms. It would be encouraging if a strong, informed government could explain the anomaly, punish those who have warped the market for personal gain, and calm the nationwide concern of consumers. Unfortunately, that has not happened. Instead, Commerce Minister Mingkwan Sangsuwan called a meeting of prosperous rice merchants and accepted their forecast that prices have to go a little higher yet.
This is where the process has broken down, and where government inaction can quickly make matters worse. Exporters claim that millers are hoarding supplies and thus raising prices with an artificial shortage. They suggest a domestic price cap. Millers point out that exporters already are sitting on a 900,000-tonne stockpile of rice for export, for which they will receive a windfall profit of billions of baht as world prices spiral upward. Farmers have sold the last crop and won't have another for more than three months. Several huge agro-companies which mill, package, sell and export rice are reaping huge profits.
The commerce minister has a plan - but it doesn't involve helping Thai consumers and offers no relief for farmers in the foreseeable future. Mr Mingkwan is off to India to sell his concept of what he calls OREC, the Organisation of Rice Exporting Countries. He thinks a Thailand-India-Vietnam consortium can set prices like Opec used to do with oil. But Mr Mingkwan's dream of setting prices much higher could bring Thailand a lot of criticism for starving poor people.
Prime Minister Samak Sundaravej is right to resist calls to flood the market with cheap rice from the 2.1-million-tonne rice reserve. But he and Mr Mingkwan seem to have forgotten that their People Power party won votes on the promise to fix the economy. They have fumbled the chance to use their power of the bully pulpit to put the pressure where it belongs.
Middlemen and businesses are siphoning cheap rice out of markets around the country. They will sell it back to those markets only at inflated prices, or they will export or smuggle it abroad to profit from higher food prices overseas.
The government's job is to ensure that businesses do not exploit farmers, while consumers have quality food at affordable prices. It is time Mr Samak and his ministers attended to that.
(Source: Bangkok Post, op-ed section, 11-04-08, temp-link)
Example sentences:
committed - are working on something for the long-term, will not just work for a short time, give up, and forget about it
up to the task - are capable of solving the problem
inscription of King Ramkhamhaeng - a stone inscription that is claimed to be the earliest example of Thai writing, discovered in 1833 by King Mongkut, there was a very bitter and inconclusive debate over the stone's authenticity several years ago (See Wikipedia)
natural disasters - when some event in nature causes harm to large numbers of humans, events include earthquakes, volcanic eruptions, tsunamis, floods, storms, droughts, fires, epidemics, and insect infestations, meteors from outer space (See Wikipedia)
a drought - a long period of months or even years, when there is not enough rainfall and the water supply is not enough for everyday life and agriculture, usually this only occurs during the dry season when there is little rain and wells run dry (See Wikipedia)
starvation - a severe reduction in vitamin, nutrient, and energy intake, and is the most extreme form of malnutrition. In humans, prolonged starvation (in excess of 1-2 months) causes permanent organ damage and, eventually, death (See Wikipedia)
panic - a very strong feeling of fear and anxiety that makes you act without thinking carefully
a staple - important to people's everyday lives
rationed - when everyone is given a share of a scarce product
normal market mechanisms - when the price moves up or down to "clear the market" and make "supply equal to demand"
forces are at work outside normal market mechanisms - if speculators believe that supply will be much lower in the future and therefore prices much higher, they may store (hoard) rice for future sale
informed - know what is happening in a situation
an anomaly - different from what is usual or expected
warped - distorted, make different from what it should be
warped the market for personal gain - distort market forces, for example by hoarding, to gain by reselling in the future (a bunch of rich guys with a lot of money could conceiably buy all the rice and then when people really needed it sell it to them for absurd prices, economists might argue that this is unlikely or at least requires proof and solid evidence)
hoarding - secretly storing large quantities of scarce things (See glossary)
an artificial shortage - a man-made shortage, not due to weather, pests, or other natural disaster
domestic price cap - a limit to how high domestic prices can rise
a windfall, windfall profits - money received unexpectedly, often by luck (See glossary)
spiral upward - move steadily upwards without decreasing at all
reaping huge profits - making very large profits
no relief for farmers in the foreseeable future -
OREC, the Organisation of Rice Exporting Countries -
a consortium - a group of people, firms, or countries that agree to cooperate with each other to achieve some objective
OPEC - Organization of Petroleum Exporting Countries, a group of the major oil exporting nations that attempts to control the supply of oil on world markets (See Wikipedia)
rice reserve - rice held for special use or emergencies
fumbled - do something clumsily, unable to do in the proper way, make mistakes
a pulpit - a place to preach to people from (), the small raised platform in a church where the priest or minister speaks from
a bully pulpit, the power of the bully pulpit - the opportunity for spreading one's opinion and views to the public provided by a public position such as serving in an elected or appointed government office
siphon - misuse a resource
siphon X from Y for Z - take resource X from Y and use it for unintended purpose Z
siphoning cheap rice out of markets - rice is sold in markets to be bought, cooked, and eaten, rather than bought and hoarded (some economists may disagree)
inflated prices - increased prices
smuggle - to take things into or out of a place secretly and illegally
exploit farmers - not paying farmers enough for their crops
