Page last updated at 10:19 GMT, Wednesday, 7 May 2008 11:19 UK

Cyclone fuels rice price increase

Cyclone damage Irrawaddy
Irrawaddy is a key rice growing region in Burma

Rice prices have risen for the fourth consecutive day, as tight supplies are aggravated by the disaster in Burma's key rice-growing region.

The cost of rice, the staple food for almost half the world's population, increased by 2.4% to $21.6 per 100lb on the Chicago Board of Trade.

Cyclone Nargis, which has killed tens of thousands of people, struck areas where 65% of Burma's rice is grown.

The disaster comes as rice and other food prices are already soaring.

The higher price of US long-grain rice in Chicago has been replicated around the world, with Thai and India rice also increasing sharply.

Food shortages

The cyclone hit the Irrawaddy delta and other key rice-growing areas in Burma.

The UN's Food and Agriculture Organisation (FAO) said the region had been due to export 600,000 tonnes of milled rice in 2008.

Banning the export of rice produces a domino effect across the world market
RS Seshadri, Tilda director

However, it said secondary crops, normally harvested from April to June, could have been damaged by the cyclone, while rice already harvested might have suffered from poor storage.

The FAO said "localised food shortages" were possible, while exports could also be hit.

Export limits

Global rice prices have now risen by more than 50% since the start of the year.

Rice price

This rise has been driven by both supply and demand factors, including shortages due to poor harvests, as well as growing populations in some rice-importing nations.

More recently, forecasts of further price rises have prompted hoarding, making matters worse.

Thailand, India, Bangladesh and Egypt have moved to set limits on rice exports to try to guarantee sufficient domestic supplies and calm price rises.

However, this has only made prices rise further on the global market.

"Banning the export of rice produces a domino effect across the world market, increasing the pressure on demand from those remaining countries whose markets are still open and causing inflation in countries reliant on imports," said RS Seshadri a director of rice giant Tilda.

'Shrinking supply'

The higher prices have hit all types of rice, from standard long-grain to India's premium Basmati variety.

"Increasing global demand and shrinking supply, combined with soaring production and distribution costs are simultaneously conspiring to create a 'perfect storm' of high Basmati prices," added Mr Seshadri.

China is the world's biggest rice producer, but almost all of its crop is kept for the domestic market. With the world's largest population to feed, Beijing keeps rice prices subsidised.

Thailand is the world's largest rice exporter.



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