But this crisis is not all it seems.
As what Agriculture Secretary Arthur Yap told BBC, "There's no shortage...
the problem is not with supplies, but with price.
" "And when you consider that 80% of our population spends 60% of their income on food, and 40% of that is on rice, it is very serious.
" By hoarding rice, consumers are actually pushing the price of rice even higher due to the increase in speculative demand.
Furthermore, unscrupulous suppliers will also make use of this crisis to profit even more.
Why do people want to hoard rice? For ordinary households, consumers hoard rice for two reasons.
- To ensure there is no shortage of rice in the household.
- To avoid impending price hikes in rice.
And yes, there will be so-called "food security" for these people in the short run.
However, how will these people be affected in the long run? A demand & supply analysis is used to illustrate the long-run effects.
Demand-side argument Out of fear for impending price rises in the future, consumers make a decision to buy more rice than they need.
As a result, the rice market oversees a rise in speculative demand for rice from the consumers.
This means that quantity of rice demanded is not equal to quantity of rice actually consumed.
Due to the increase in speculative demand, total quantity demanded for rice increases.
As a result, to maximise profits producers will increase price for rice sold.
Hence, price of rice increases because of an increase in speculative demand from the consumers.
Supply-side argument To cope with the increase in quantity demanded for rice, producers will have to increase quantity of rice sold.
There are two ways it can do this:
- Draw from existing rice stockpiles/reserves and sell the surplus.
- Increase rice production.
Why? Most varieties of rice require an average time of 3-6 months to grow before it can be harvested.
The increase in opportunity cost for growing more rice (i.
the time could have been used to grow other food crops, the additional labour used for harvesting more rice etc.
) will justify the producers in increasing the price of rice further when it sells the new harvest.
If producers were to draw from existing rice stockpiles, technically they do not need to produce more rice, but then the cost of hiring labour to deliver rice from the storage warehouses to the market will still give producers an incentive to increase price to minimise their operating costs.
Conclusion Thus, the two arguments prove that hoarding rice will only result in price hikes in the future.
Thus, hoarding of rice should be discouraged as it only discourages social equity and harms the society in the long run.
The consumers who hoarded rice in the past won't be spared from the price hike too.
Given the fact that brown rice can only be stored for 6 months in average conditions, and the common occurrences of natural pests such as rice weevils, consumers should not expect their own stockpile of rice to last long.
What the individual can do instead Here are some pointers to what you can do instead, to prepare yourself for the impending price hike:
- Gradually reduce and ration your rice intake.
- Start eating alternatives in greater portions during meals, such as potatoes or cereals.
- Take the initiative and upgrade your work skills, so that you have more income and can cope better with the price hikes.
However, few realised that the current price hike of rice also highlights the vast income inequality in the population that many nations faced.
According to statistics from The Thailand Rice Exporters Association, production of rice has been increasing all this while.
For instance, milled production in 2004-2005 was 400,475,000 MT, while production in 2006-2007 was 418,235,000 MT.
This proves that there were no hitches in rice supply.
The main reason why there is a so-called shortage of rice is because rate of increase in demand is exceeding rate of increase in supply at an alarming rate (note: not quantity, but rate of increase in quantity), and thus this has led to market speculation which results in price hikes all over the world.
As a result, no matter how much rice is supplied, there will always be "rice shortage" because the poor can't afford to buy rice.
As long as price remains at the current inflated level, the lives of the poor won't get better.
Thus, this means that since consumers can't change the way rice is priced, they can do the next best alternative; to try and increase their income instead.
This will mean upgrading their existing working skills so as to supplement their current income.
Until the situation improves, otherwise it does not seem that the man on the street can do anything much, but to grit through their teeth and continue to plough on in life.
- Hoarding rice is an ineffective way to cope with the current price hikes.
- Do not listen to market speculations and fear, because they are the essential factor now that is prompting an even greater price hike.