WFP chief economist: 'We're worried' about rice prices

The rising cost of rice is an ominous sign that echoes the food crisis of 2008, when it became the crop with the biggest impact on food security, particularly in West Africa, the World Food Programme’s chief economist told Devex. Last month’s floods in Pakistan could exacerbate things. The country, previously the fourth-largest rice exporter, will soon become a net importer because so many fields were wiped out, Arif Husain said. This, along with the current global shortage of fertilizer, will increase strain on global rice supply, he said. “Right now we’re keeping a very close eye on rice,” Husain said. Rice is a staple food for more than half of the world’s population. Its supply is currently not affected by the war in Ukraine, which is not a major rice producer, but the crop’s rising price could indicate problems elsewhere in the market. “What shocks me is that it’s not in one, two, or a dozen countries. It is in 45 countries, spread out. We haven't seen anything like that before.” --— Arif Husain, chief economist, World Food Programme Still, the current crisis provides an opportunity to make changes to the food system that should have been made after food price spikes in 2008 and 2011, but were not, Husain said. “Our tendency is that as soon as the problem goes away, we go back to our usual business,” said Husain, adding it would be more efficient to fix the problem in the first place. He suggested a better way would be for countries to “diversify their export base” and think more strategically about reserves — without hoarding. “And doing it when things are calm,” he said. “Not in chaos.” Staple crops such as wheat, corn, soy, and rice are highly concentrated in a few markets, creating mass global disruptions when problems hit one of those places, Husain said. But diversification isn’t simple, he warned. “Here’s the problem: If the countries were to diversify import bases, it cannot be done in a week or 10 days or one month or six months. It takes a couple of years.” Governments should be more transparent about the size of their reserves, so there is an accurate accounting of how much of each crop is actually available, he said. This would provide a clearer picture of possible shortages of staples and help prevent market distortions. Greater international coordination is needed to respond quickly where hunger is already at alarming levels. “What shocks me is that it’s not in one, two, or a dozen countries. It is in 45 countries, spread out. We haven't seen anything like that before,” Husain said, adding that he was struck by the sheer magnitude of the problem. “This is bigger than all of us in our individual organizational capacities.” Husain said the narrative of falling prices — wheat was down 5.1% in August, the third consecutive monthly decline — creates the impression that the crisis is easing; and that’s a concern. Even if prices are falling back to pre-war levels, they remain at record highs. Before Russia invaded Ukraine, food prices were at a 10-year high and fuel prices were at a seven-year high, Husain said. “This is still an affordability crisis as we speak. There is food, but it's not in the right place or it is not available at an affordable cost to the masses. But if we don’t sort out the fertilizer issue and sort that out really, really, really quickly, then it becomes an availability crisis, come next year.” If that does happen, Husain said, there is then an actual shortage of food — which will only further increase prices. Making sure fertilizer is affordable needs to be a “top priority” to avoid this, he said, so yields can be maximized. The strength of the dollar has also harmed countries’ ability to import food at affordable prices because global commodities are sold in dollars. It is also compounding the post-COVID-19 debt crisis by raising borrowing costs. Making this tangible to those yet to be affected is key, Husain said. That includes understanding how food insecurity can spur migration to Western countries. “We need to start asking ourselves what if we don’t take care of any of this? What would be the cost? I call it the cost of humanitarian inaction,” he warned. “There is a huge cost of inaction. It’s political costs, it’s economic costs. The thing is it’s a little bit later, but then you pay one thousand times more.”