Food security concerns spike

Dhaka: Bangladesh, South Asia's biggest rice buyer, is in talks with India to buy grains on a regular basis to bolster food security as governments seek to avoid a repeat of the unrest that broke out when prices last soared.

A long-term agreement will protect Bangladesh from possible defaults by private traders, who sometimes fail to meet their commitments if prices gain, Mohammad Abdur Razzaque, the nation's food minister, said in an interview yesterday. "Rice prices rose this year in our country; people are suffering as they have limited income," Razzaque said by phone from Dhaka.

Bangladesh's plan underscores a drive by governments to strengthen their reserves to help manage the impact of food prices that advanced to a record last month, beating the jump in 2008 that spawned riots from Haiti to Egypt. This year's surge has driven millions into extreme poverty, according to the World Bank, and contributed to unrest in the Middle East and Africa.

"When we go for international tenders and prices suddenly rise, private suppliers sometimes fail to fulfill their commitments," Razzaque said. "They don't supply us and put us in trouble. It has happened."

Wheat, corn, soybeans and palm oil have surged in the past year on increased demand and supply disruptions, driving the Food and Agriculture Organisation's World Food Price Index to an all-time high in January. The jump has boosted inflation, adding to the case for higher interest rates worldwide as central banks also contend with rising oil prices spurred by a revolt in Libya.

Roubini's warning

Higher commodity prices are "leading to riots, demonstrations and political instability," Nouriel Roubini, the New York University professor who predicted the financial crisis, said last month. Costlier food "can topple regimes," he said.

Bangladesh has a population of 166 million, with 32 per cent aged less than 15, according to Bloomberg data.

Slightly smaller than the US state of Iowa, the country ranks 196th among nations when compared by gross domestic product per head on a purchasing- power-parity basis, according to the CIA World Factbook.

Governments around the world will "take preemptive measures to prevent increases in food prices," Alan Winney, chairman of Emerald Group Australia, has said. Bolivia will tap central-bank reserves to stockpile food and spur farm production, Finance Minister Luis Arce said on February 10.

Thai rice prices climb

Thai rice prices, the benchmark for Asia, have gained over the past six months. The price of 100 per cent grade-B white rice, which is set weekly, was $550 (Dh2,019) a metric tonne on February 23, according to the Thai Rice Exporters Association. Last year's low in July was $458 a tonne. Thailand is the world's biggest rice supplier.

Increased purchases of rice by Bangladesh from neighbouring India may lower Thai prices, according to Rakesh Singh, a trader at Emmsons International. Bangladesh has agreed to purchase 300,000 tonnes of Indian rice, as well as 200,000 tonnes of wheat, Razzaque said on February 9.

Surging food costs hit the most vulnerable hardest as they spend a greater share of their money on food, World Bank president Robert Zoellick said earlier this month. People in developing countries devote half or three-quarters of their income to food, "so they've got little margin", Zoellick said.

Coarse rice in Dhaka climbed 42 per cent higher than a year earlier, the FAO said in a January 17 report.

Bangladesh has doubled its rice-import target to cool local prices as consumers and farmers hoarded supplies. The country will buy 1.2 million tonnes in the year to June 30, from a 600,000-tonne target set in November, Badrul Hassan, director for procurement at the Directorate General of Food, said last month.

The government may buy as much as 2.5 million tonnes of rice and wheat in the year to June 30, while private companies may import 2 million tonnes of wheat in the period, Razzaque said. If the planned Indian purchases happen "our imports will exceed 1.2 million tonnes this year ending June," he said yesterday.

The price of rice may increase as a rally in wheat drives consumers to seek alternatives, Robert Zeigler, director general of the International Rice Research Institute, said on February 11. Wheat in Chicago has surged 57 per cent over the past 12 months.