Events Calendar
In This Section
Most Read Stories
Unusual sports bar to be sold at auction
Motorcyclist killed, wife injured in Stark County crash
Family found dead in Ohio home
Man says he was punched, robbed by 3 people in parking lot
Circle K on Brown Street robbed
Man gets 3 years in prison for having sex with horse
Bank helps more save their homes
Woman says clinic refused to help her get pregnant because she's not married
Blogs:
Pets:
Officials: NYer Had 20 Dead Dogs Buried in Yard
The Heldenfiles:
Monday Notebook
Patrick McManamon:
Time for Kokinis, Browns to agree and part ways
Akron Zips:
Zips tip off tomorrow
Tribe Matters:
Indians announce spring dates
Cleveland Browns:
Mangini doesn't name a quarterback
Kent State Sports:
KSU Notes – November 9
Cleveland Cavaliers:
Shaq: It’s All About Winning Championships
Buckeye Blogging:
Weekly ‘B’ Deck Report – New Mexico St.
Varsity Letters:
Louisville’s Bobby Swigert headed to Boston College
All Da King's Men:
If It Looks Like Islamic Terrorism…
Blog of Mass Destruction:
Dems Message To Women: Don't Enjoy The Sex
Akron Law Café:
Abortion Analogies
See Jane Style:
Muffle Your Muffler
Car Chase:
Clock Tender- Extending the Life of Collector Car Clocks
Let's Talk Real Estate:
Rumors: Akron Starbucks Closing
Ohio Travels with Betty:
Jack is looking for a trip to Southern Ohio the week of November 16.
Sound Check:
The Black Keys to perform benefit concert at Musica on November 27
HRLite House:
Personal Rant – Why People Do Not Live in Northeast Ohio
Akron Gamer:
New 'Call of Duty' could set entertainment record
Idea might be beneficial for producers, but hurt consumers everywhere
By William Pesek
Bloomberg News
Published on Sunday, May 11, 2008
Until last week, the next oil — the crucial resource growing ever scarcer and prompting desperate behavior to ensure supplies — was water. Turns out, it's rice.
That's at least what some Asian leaders think. Hence a plan in Southeast Asia to create an OPEC-like cartel to manage rice supplies amid record prices. Thailand and Vietnam account for almost half of global rice exports. Add in Cambodia, Laos and Myanmar, and Asia's cartel would wield more power over food prices than OPEC does with oil.
It's a terrible idea. For one thing, an Organization of Rice Exporting Countries, or OREC, would presumably favor high prices. That might benefit producers, but hurt consumers everywhere. For another, the timing is awful with commodity prices reaching unprecedented levels.
Haruhiko Kuroda, president of the Asian Development Bank in Manila, says ''the agriculture market should be market-driven'' and that ''any kind of cartel isn't good for the exporters and the importers.'' Philippines Senator Edgardo Angara says it would ''create an oligopoly, and it's against humanity.''
It's hard to see how a rice cartel would work. With oil, you have reserves — actual stockpiles of the commodity. Rice needs to be harvested. Its production is dependent on weather, the cost of fertilizer and the availability of arable land and water. And how exactly can you control farmers growing rice or not growing it?
Asia's disparate economies also aren't renowned for cooperation. Among Mekong Delta nations, you have a constitutional monarchy, an immature multiparty democracy, two communist states and a military regime — all at very different levels of development. Seriously, folks, good luck making that work.
Food-price trends
The real story here is this: The very idea of a rice cartel speaks to the desperation with which Asia is treating food-price trends.
Food security hijacked recent meetings of the ADB and Association of Southeast Asian Nations, or Asean. At the ADB event in Madrid, there was vague, yet worrisome talk of 1997-like crises in certain Asian nations. Not a regional meltdown that sends contagion across the globe but scattered ones.
One sign of the anxiety coursing through Asia is talk in India of suspending trading in more food futures as political pressure grows. India has already halted trading in wheat, rice and lentils. Now there's pressure to ban dealing in cooking oil, sugar and other commodities.
The idea of banning commodities trading sounds farfetched. Markets play an important role in valuing goods and redistributing them. Yet speculation in everything from oil to gold to food is causing froth in prices. There's a speculative bubble in speculation.
It says something about the crazy market environment we're living in when George Soros leaps out of retirement to get in on it. Good timing, too: Soros earned an estimated $2.9 billion last year, according to Institutional Investor's Alpha Magazine.
''If rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice,'' Indian Finance Minister Palaniappan Chidambaram told Bloomberg on May 4.
It makes you wonder why exchanges don't start demanding that buyers take delivery of the commodities they trade. The bottom line is that Wall Street doesn't realize the effect that food prices are having on the developing world.
Talk of trading bans is enough to send chills down the spines of disciples of Milton Friedman. Then again, one could argue that those who believe oil prices are set by the market are delusional. OPEC ultimately controls the value of oil — not traders.
Asia is especially vulnerable to rising food costs. It's home to the bulk of the world's population and families living in poverty. Many of the most promising markets also are there.
Global food prices surged 57 percent in March from a year earlier, according to the United Nations. ADB officials estimate food expenditure accounts for 60 percent of household outlays for poor families — 75 percent when fuel costs are added.
Cautionary tale
It isn't hard to see why Asia is considering drastic measures. To many in the region, creating a rice cartel seems no more irrational than the Federal Reserve saving Bear Stearns Cos. from collapse. Yet OPEC's influence is a cautionary tale.
President Bush in January traveled through the Persian Gulf begging for an increase in oil production to give U.S. consumers a break. Bush's pleas fell on deaf ears.
On the campaign trail, Hillary Rodham Clinton has ratcheted up the rhetoric on OPEC. While the summertime gas-tax holiday proposed by U.S. presidential candidates Clinton and John McCain is just plain stupid, she's right to question the world's most-watched cartel.
''They can no longer be a cartel, a monopoly that get together once every couple of months in some conference room in some plush place in the world and decide how much oil they're going to produce and what price they're going to put it at,'' she said.
Given how global markets are held hostage by OPEC, a rice cartel hardly seems like a wise move.
Until last week, the next oil — the crucial resource growing ever scarcer and prompting desperate behavior to ensure supplies — was water. Turns out, it's rice.
Get the full article here.
Comments
Click here to post your comments
