Wednesday, April 30, 2008

The price of rice

It surprises and humbles when a crisis comes, seemingly, out of nowhere, to upset the agenda we thought we had set for ourselves, our businesses or our government.

Such is the case of the global food crisis, which the UN World Food Program has termed a "silent tsunami." Globalization has created a degree of interdependence never previously imagined. Whether we like it or not, the world is ever more integrated politically, culturally and economically.

We are now learning more about rice then, perhaps, we ever cared to. How many of us knew that Thailand was the world's biggest rice exporter and the source of most of Israel's supply? And who would have imagined that 225 million people a year could be fed on the six percent of Asian rice lost each year to rats?

More significantly, experts say that there is no sudden shortage, but rather a steadily mounting demand. Rice consumption has risen 40% in three decades, according to the UN.

Whatever the nature and extent of the crisis, even the most downtrodden of humanity do not face mass starvation. But the 1 billion "very poor," who live on $1 a day, confront worsening malnutrition. For Israelis, and others fortunate enough to live in the developed world, the impact is likely to be more on our pocketbooks than in our stomachs.

It was not always so. The patriarchs Abraham and Isaac left the Land of Israel because of famine and drought. The fulfillment of Joseph's prophecy, of seven years of famine, forced Jacob to send his sons to Egypt in search of provisions. Famine remained a recurring theme throughout the Bible. The Sages considered famine an even greater evil than war.

TODAY'S FOOD crisis is precipitated by an assortment of mostly demographic and economic factors. For instance, as the 1.1 billion people of India and the 1.3 billion of China have grown relatively affluent, it's only natural that they have begun eating more grain and meat. This has impacted on the balance of demand for these products. Meanwhile, as the US and EU convert corn into ethanol fuel, demand for cereals has soared. Add to this mix a series of natural disasters - cyclones in Bangladesh, droughts in Australia and floods in North Korea - that have resulted in poor harvests, and one can understand the pressures that have prompted food riots in 33 countries. Many nations have imposed price controls on rice or are subsidizing its purchase. Big rice producers including Vietnam and India have restricted exports.

WHAT DOES all this mean for Israelis? The government and importers insist there is no actual rice or food shortage, though increased demand may be causing prices to fluctuate. Israeli consumers can expect to spend more on food in the coming weeks. We consume relatively little rice per capita, yet price increases of 50-60 percent do rile. A package of rice now costs about NIS 12.5, up from for NIS 7.5. Some chains are limiting purchases.

Our sense of anxiety is worsened by largely unrelated increases in the price of bread, pasta, potatoes, dairy products, coffee, corn, cooking oil and even tehina. Adding to our worries is a report that Argentina, which supplies 50% of Israel's frozen meat, has suspended exports. The price of domestically supplied fresh meat at the neighborhood butcher is unlikely to remain static.

Nothing makes people more jumpy than telling them not to panic - and yet, objectively, there's nothing to panic about. Sure it's regrettable that food prices are rising, but the government should not be stampeded into precipitous actions that might upset market forces in a way that does more harm than good. At the same time, we do want the government to scrutinize developments and, if necessary, sensibly target financial assistance through the National Insurance Institute to those most hard-hit by higher food prices.

Short-term, the government should consider encouraging farmers to grow more wheat. Strategically, it might be prudent for policymakers to reexamine the extent of our economy's move away from agriculture - which now represents just 2.6% of GDP. Of course, thinking seriously along these lines would entail addressing the country's chronic water crisis. And that is one calamity that should take no one by surprise.

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