USDA's Schafer reassures no rice shortage

KANSAS CITY, Missouri Thu Apr 24, 2008 6:14pm EDT

1 of 3. A posted sign informs customers of the limits placed on bags of rice at a Costco store in Arlington, Virginia April 24, 2008.

Credit: Reuters/Jim Young

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KANSAS CITY, Missouri (Reuters) - U.S. Agriculture Secretary Ed Schafer on Thursday sought to calm the frayed nerves of consumers, saying there was no shortage of rice in the United States even as a major outlet limited sales.

He also said the surge in rice prices to record highs at the Chicago Board of Trade, the world's largest grain exchange, could be attributed, in part, to speculation about future rice shortages.

"We don't see any evidence of the lack of availability of rice. There are no supply issues," he told reporters after addressing a conference on agro-terrorism in Kansas City.

"Part of the price issue is speculation because we're so close to capacity...that if something disrupts it like the weather pattern then you can start seeing some supply issues.

"But today there are no supply issues that we see in the marketplace or in the foreseeable future," he added.

Schafer's remarks come one day after retail giant Wal-Mart Stores Inc's Sam's Club warehouse division said it is limiting sales of several types of rice. A day earlier, Costco Wholesale Corp. said it was seeing increasing demand for items like rice and flour as customers stock up.

Export curbs by suppliers like Vietnam, India, Cambodia and Egypt to ensure sufficient domestic supplies have helped to push rice prices to record highs, with values in top exporter Thailand surging to $1,000 a ton.

Fears over shortages have sparked food riots in Africa and toppled the government in Haiti.

Rice prices at the CBOT rose to an all-time high above $25 per hundredweight during Asian trading hours on Thursday, but tumbled in Chicago trade amid signs that high prices had blunted export demand.

U.S. Agriculture Department data issued on Thursday showed rice export sales in the week ended April 17 at 25,800 tons, down 85 percent from the previous week and 71 percent below the four-week average.

Schafer said there was no need for consumers to hoard rice supplies. "The worry about hoarding really is not relevant, but it certainly is understandable. People are worried about their food security," he said.

The International Grains Council said in a monthly report on Thursday that the global rice market should be "broadly in balance" this year, with the sharp increase in prices linked to export restrictions from key producers.

"With several countries relying heavily on imports, concerns about securing rice of the types required has, in some cases, accelerated buying activity, further pushing international market prices higher," the IGC said.

U.S. POLICIES NOT TO BLAME

Schafer also addressed criticism that U.S. subsidies for corn-based ethanol production was driving food price inflation around the world and reiterated an unwavering Bush Administration's stance in support of ethanol production.

He said only about 25 percent of the corn crop goes to make ethanol and said that the forces driving rising prices in corn and other commodities had more to do with energy costs, increased consumption around the world and weather-related production problems.

Critics who blame high food prices on U.S. policies they say encourage corn to be diverted from food and livestock feed use to alternative fuels are "flat out wrong," said Schafer.

He said acceptance of biotechnology and precision farming practices were key.

"Unless we can convince other nations to accept the biotechnology and the good farming practices and the precision farming methods that we use today in the United States to increase yields across the globe, we're going to continue to have these price structure and problems with food and hunger in the world today," Schafer said.

(Writing by K.T. Arasu; Editing by Marguerita Choy)

(Reporting by Carey Gillam)

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