Paris: Rising oil prices "significantly" affect the cost of rice production, and higher petroleum prices may boost spending on the staple food and reduce farm profits, analysis by Malaysia's Putra University showed.
Malaysian rice prices would rise 1.6 per cent for every 10 per cent gain in crude oil, according to a study on the long-run relationship between 1970 and 2008 by Abdul Rahim Abdul Samad, a tutor at the university's Department of Economics.
"Crude oil is a factor in farming costs because of its use as a fuel in tractors and as a raw material in fertilisers," Abdul Rahim said.
"For rice there is a significant relationship, because there is no substitute." New York crude prices have risen 41 per cent in the past 12 months. Price gains for rice, a staple for half the world, have trailed those of other grains in the past 12 months, with Thai grade-B white rice rising 6.1 per cent in the period compared with a 58 per cent gain for Chicago wheat prices.
The study "implies that as the price of world crude increases, the price of rice will also increase," Abdul Rahim wrote. "These findings clearly demonstrate the implications of the world crude-oil prices on the agriculture sector."
Rice is "probably" the commodity separating the world from a food crisis comparable to that of 2007-08, FAO's senior economist Abdul Reza Abbassian said.
