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Bumper rice harvests could bring down prices but poor may not benefit, warns UN

Bumper rice harvests could bring down prices but poor may not benefit, warns UN

Rice harvesting in West Africa
The consumer cost of rice, a staple for much of the world, could fall this year thanks to a bumper harvest in 2008, the United Nations Food and Agriculture Organization (FAO) reported today, but cautioned that the negative impact of the global economic downturn and the resulting loss of jobs and income could outweigh the benefits of lower prices for the poorest consumers.

Last year’s rapid increases in the price of rice and other cereals played a major role in the food crisis, characterized by high fuel and fertilizer prices that triggered political unrest in many countries, particularly in the developing world.

“One positive effect of the high rice prices in 2008 was that farmers and governments took up the challenges and opportunities and planted more, boosting production despite high fuel and fertilizer costs and a scarcity of quality seed,” said FAO Senior Economist Concepcion Calpe.

Favourable weather conditions also helped to boost harvests despite high fuel and fertilizer prices. A variety of government measures designed to dampen the effects of soaring prices on the poor also contributed to high yields.

“If last year [governments] had to intervene on two conflicting fronts, both to stimulate rice production and to keep rice affordable to consumers, they may face even greater challenges in 2009 in the context of the severe global economic slowdown,” the FAO warned in its February Rice Market Monitor report.

“In this context, governments may again have to intervene, this time to sustain rice producer prices while also protecting the purchasing power of their populations, at a moment when demands for public help from other sectors are quickly intensifying,” it added.

In its report, FAO predicted global paddy production to rise to 683 million tons in the 2008 season, a 3.5 per cent increase on the previous year and the fastest rate of growth for three years.

The increase in the amount of rice, the staple food for around 2.5 billion people globally, is due to an over two per cent expansion in the amount of land cultivated globally as farmers and governments reacted to soaring prices in 2008.

FAO reported that global rice prices ended last year 80 per cent higher on average than in 2007, and the price of a ton of the benchmark Thai white 100 per cent second grade was $611 in January 2009 compared to $385 in the same month in 2008 having risen to a peak of $963.

Although lower prices are good for consumers, export prices below $400 per ton for top quality white rice could adversely affect producers and hamper polices geared towards self-sufficiency in many importing countries, FAO said.