Rice and the global financial crisis

 Samarendu Mohanty   |  

In the October–December 2008 issue of Rice Today, I wrote an article (Rice crisis:, pages 40-41) the aftermath highlighting the 2008-09 supply and demand situation and the long-term challenges to meeting future demand growth. Soon after that article went to press, the calamitous global financial crisis and attendant fall in commodity prices cast a dark shadow over the agricultural situation, despite the drop in crop prices. Since reaching their peak earlier this year, wheat and rice prices have fallen steeply. The price for 100% grade B Thai rice fell to $575 per ton in late October 2008 from a whopping $1,080 per ton in April 2008, a result of record production and economic slowdown. It is important to remember, however, that current rice export prices remain around double those of mid-2007. Following crude oil and agricultural commodities, fertilizer prices, particularly for urea and ammonia, also plummeted toward the end of 2008 after reaching record highs in September.

Short term impact

The meltdown of commodity prices may have caught off-guard many farmers who in late 2008 harvested a lower-priced crop produced with high-priced inputs (such as seeds and fertilizer). Burned once, these farmers will likely play safe and reduce input use for their 2009 crops. The credit crunch will also make it difficult for farmers around the world to secure credit for purchasing inputs. Signs of this trend have already emerged.

Already, the Philippines has lowered its 2009 rice production estimate by almost 4% because of lower input use as farmers struggle to secure credit to buy inputs. Similar news from other rice-producing countries is likely in the near term.

Production uncertainty due to tight credit and declining rice prices combined with strong demand growth points to another rise in rice prices in the coming months. Price volatility will remain high.



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