American farmers supply Japan with large quantities of high-grade
rice, much of which languishes in silos or becomes animal feed
Posted on 05/16/2008 8:56:21 PM PDT by bruinbirdman
The United States and Japan are poised to strike a deal that will remove one of the most widely reviled distortions in global rice markets and could send prices plummeting in the coming weeks.
The move, which will flood the market with an estimated 1.5 million tonnes of high-grade American rice that is sitting in Japanese silos, comes amid continuing rice export restrictions by some of the world's biggest suppliers and rioting in countries where the population cannot afford the price increases.
American farmers supply Japan with large quantities of high-grade
rice, much of which languishes in silos or becomes animal feed
Senior government sources in Tokyo told The Times that Japan had received permission from Washington to begin exports from its giant, but largely hidden, mountain of unwanted American rice to countries that need it most. The exposure of the vast Japanese rice surplus has emerged as one of the chief imbalances of world rice markets and an effect of the complex and wasteful lattice of rules, subsidies and pacts that have knocked global agriculture markets so badly out of kilter.
Rice experts say that the move could defuse temporarily one of the principal catalysts of the food-price crisis - the perception that the world is running out of rice - and the panic and hoarding that has accompanied it. With commodities traders sniffing that a US-Japan deal was imminent, rice futures ended the Asian trading week in a dramatic nosedive as the prospect of a sudden supply surge and bullish harvest forecasts routed speculative money from the market.
The collapse came as think-tanks and food experts called on Japan and the US to urgently unwind one of the biggest “invisible” distortions in global rice markets: a quirk of World Trade Organisation (WTO) rules that obliges Tokyo to buy rice it does not need and that eventually rots in storage. The WTO rule, its many critics say, effectively turns millions of tonnes of high-grade American produce into feed for Japanese hogs and chickens.
Researchers at the Washington-based Centre for Global Development (CGD) said that if that distortion were removed, and the 1.5 million tonnes of unwanted US rice were released from Japan's storage silos, the crisis that has sent the price of the crop that feeds half the world surging up would be solved instantly. The centre has suggested that rice prices could halve by the end of the month.
Standing in the way of that, however, has been a rule that prevents Japan from re-exporting its reserves of US rice without permission from Washington, which has not been forthcoming until now because of the fear of domestic political repercussions from the US rice industry.
A concerted political effort, CGD researchers said, would prick the speculative bubble and the hoarding mentality that has sent rice prices into the stratosphere. They wrote: “What's needed now is a sudden surge of unexpected supplies ... to reassure anxious countries and poor people around the world that there is indeed enough rice for everybody.”
Benchmark rice futures indices tumbled 5 per cent yesterday amid a frenzy of sell orders that pushed the key contract below the $20-per-100lb mark. Adding to the sharp drop were forecasts of a good harvest, which contributed to a 14 per cent fall in the rice price over the week.
Traders gave warning, however, that many of the factors that propelled rice prices to their recent highs remained in place. The cyclone in Burma has effectively turned that country from an exporter to an importer or rice, and export restrictions in India and Vietnam remain in place.
Government sure makes more efficient use of resources than the free market! ...........not
Almost every economic problem can be traced to a government distortion of the free market. Real problems are inevitable (and largely unavoidable), but it is asinine to exacerbate them with artificial distortions (price controls, subsidies, tariffs, etc). It is more than just the taxpayer who takes a hit. The hubris of people who think they can engineer a better result than the natural innovation-selection-innovation-selection market process is astounding.
I’m conjecturing that WTO mandate is designed to offset a trade imbalance of some sort.
I’ll tell you what doesn’t make sense. Why and how does grain “rot”? Grain should be storable for at least a thousand years. If their grain stores are “rotting” it’s because they want it to rot.
Obviously the rice dosne’t rot - the Japanese are not so foolish as to allow a strategic rice reserve to simply disappear.
But - They do not want cheap American rice on their market forcing out their local growers. In Japan there is hardly an acre of land outside of parks that is not growing something - and mainly rice.
Any insights would be appreciated.
Last time we went for stock up at Costco, I bought a 50lb. sack of rice because the newsmedia was spewing something about the sky having fallen into the rice fields and absorbed all the water, and all the rice was dying of ozone holes, or something like that. Can’t trust the old memory anymore, but I thought it essential to buy the rice because we eat a lot of it.
My point here though isn’t about eating rice, it’s about the Left. I will bet one ozone hole in a rice field that the Left is looking at our Strategic Oil Reserves in the same light as this rice situation of the silos in Japan. If the price of rice will be halved, then by Da—ed the price of oil should be halved with the trickle of oil diverted from the Strategic Reserves to anchorage in outer port awaiting to offload God knows when to our backed up refineries.
In reality the oil won’t quit flowing into the reserves until July, so they’ll be on the brink of full anyway.
Regardless that’s how the Left thinks...IDIOTS!
Wow! Increase supply and look what happens!!!
Too bad the Democrat Party is full of Marxists and their 5-year plans. Otherwise they may actually believe this.
This is how this works. Japan heavily subsidizes their rice production (see the US $300 BILLION agriculture bill the Congress just passed for an example of how that works), but the WTO opens ag markets. Japanese don’t like foreign rice, and they usually grow a surplus, so to meet free-trade goals, they import rice for commercial feedstock for industrial purposes and to fill their reserve silos. Thai rice is actually cheaper for this purpose, but they import US rice to keep us quiet. They have had surplus yields recently, and they have reached storage capacity for both their own rice and US rice. They want to dump the old US rice, and now is a good time to make a profit on it, especially since current rice supply in SE Asia is uncertain and prices are up. The US wants to increase supply and lower prices in SE Asia (especially The Philippines and Thailand), so we will agree. Everyone is happy.
Obviously the rice dosne’t rot - the Japanese are not so foolish as to allow a strategic rice reserve to simply disappear.
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from the article:
“The collapse came as think-tanks and food experts called on Japan and the US to urgently unwind one of the biggest “invisible” distortions in global rice markets: a quirk of World Trade Organisation (WTO) rules that obliges Tokyo to buy rice it does not need and that eventually rots in storage.”
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So tell that to the idiot that wrote the above stupid sentence.
Sorry if I wasn’t clear ... I was agreeing with you, my FRiend
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