Discussions of Mormons and Mormon life, Book of Mormon issues and evidences, and other Latter-day Saint (LDS) topics.

Saturday, March 29, 2008

Global Rice Prices Jumped 30% on Thursday: Why You Should Buy More Today

Yesterday while flying back to Appleton, I read a shocking headline in the Financial Times about the world price of rice jumping 30% on Thursday. After reading that story, I went out today and bought more rice for my food storage. Why would I buy right after a sharp price surge when rice is at an all time high? And why do I think you should rush out and stock up today? Because the price at most local grocery stores probably has not been marked up to reflect what just happened in global markets. At Aldi, I bought rice under 39 cents a pound, which is very close to its bulk price on global markets right now ($760 a tonne - with a metric tonne being 2205 lbs, this is 35.4 cents/lb). I would suggest that if you can find it for under 50 cents a pound locally, stock up now (Saturday night).

Rice has doubled in recent months, and the 30% spike on Thursday is especially troubling. While the weakness of the dollar has made the increase especially painful for US residents, the world price increase is due to much more than currency weakness. There is a shortage, with stocks at all time lows and major exporters like Egypt stopping or reducing exports to help lower prices at home.

33 comments:

Tracy Keeney said...

I read your post just about 20 minutes before I was heading out the door for none other than Aldi!!
I just bought rice there last Tuesday-- it was 89 cents for a 3lb bag.
The same bag was $1.19 tonight.
Depressing!!

Clark Goble said...

Ditto for wheat by the way.

Also be prepared that most other prepared foods will also be increasing significantly due to the price of basic goods jumping. While oil has a lot to do with all this so to does the inexplicable rise of bio-fuel.

Bookslinger said...

Jeff,
I think you should feel at least a teensy bit guilty about what you did.

Your purchase of the cheap rice caused someone else (for whom the price difference may have been more significant, and whose family eats rice on a daily basis) to pay a higher price.

There may have been a struggling Hispanic or Asian family in Appleton who would have bought that bag of rice, and whose economic circumstances would have benefited more (relatively speaking) than yours.

Even at a macro level, it could have effected people in other locations, because now the store has to buy another bag of rice (that it wouldn't have had to if you hadn't bought that one) and then the effect is passed on to another location.

Your admonition to buy rice, especially towards those who may already have a year's supply on hand, amounts to "panic buying", which will only exacerbate the price spike.

The best time to build or augment a year's supply is when prices are _steady_ or in a _trough_.

Thousands (or tens of thousands) of LDS building up their year's supply during a time of sharply rising prices doesn't seem wise.

With your understanding of economics, I expect you would see the big picture here.

Also, under the "wouldn't it be cool" department, suppose all active LDS families already had a year's supply before the price spike hit (ok, we can dream, can't we?).

Then suppose that the church's welfare department kept track of grain prices, and advised the 1st presidency, and the 1st presidency gave encouragement about when to build up our supplies, and when to eat off of our supplies.

What a wonderful "even-ing out" effect the LDS would have, if we all could stop adding to our long term supply in times like this, and then _add_ to our long term supply when prices stablize or are on the downswing.

This would essentially be "anti-hoarding", because of the positive effect it would have on the market.

I may not be using all the correct vocabulary, but I hope you get the gist of it.

Granny said...

Bookslinger, your points are well made, if Jeff were a selfish person who "hoarded." However, over the years I've been reading this blog, I'm convinced that he isn't a selfish person. My belief is that a significant quantity of that rice, and/or whatever else he has in storage, will be lovingly given to other people who may not be so fortunate as he, and not kept for just himself. So, looking at it that way, many more folks can be benefited than if he'd not purchased it. Does this make sense?

Granny

Bookslinger said...

Granny,

I'm not talking about a widespread disaster wherein people would be forced to live off of their food stores. Of course Jeff would share his storage with others if that were to occur.

The scenario under discussion is just fluctuating prices, and who can best afford to absorb those prices. Jeff doesn't really _need_ that rice in the short term. He likely already has his 1 year supply. And based on the kind of job he had at Kimberly Clark, and his new job, I don't think fluctuating rice prices are going to put a dent in the Lindsay family's life style.

And he just now encouraged other Mormons to stock up on rice, thereby compounding the effect.

Stocking up now at a low price is well and good for those who are less affluent than he is. But what he has done is to take cheap rice off the market, which will be replaced by more expensive rice within a few days.

I'd rather see less-affluent people, and people who don't have a 1 year supply, get those savings on cheap rice this weekend.

Let the "savings" go to those who need it, and those who don't already have their 1 year supply.

Some other family that is making minimum wage and who eats rice on almost a daily basis could have needed those "savings" on those bags of rice more than he did.

People need to stop thinking of food storage just in terms of national disasters, and more in terms of "riding through" things like fluctuating prices, or temporary job loss.

Just think of how beneficial an effect the LDS could have had, had we all put in our 1 year supply of rice when it was much cheaper. Then, when this price increase hit, we stopped buying rice, and started using up our storage rice. It would have had a good dampening effect on prices.

I usually buy white rice in 10 and 20 pound bags at Asian groceries. That is for my long term storage. For short term uses, I buy brown rice, which is much more nutritious, but doesn't store as long.

RWW said...

It's not really any of your business what Jeff "needs," nor would it be wise for him to make purchasing decisions based on what would supposedly be best for others.

Mormanity said...

Interesting perspectives, Bookslinger. My tendency to shop for bargains certainly has a selfish component, as you correctly observed, but if it helps, I gave away some of that rice the same day, intend to share my food storage with others, and right before my purchase, paid extra for some tamales sold by a recent immigrant family I met last year while helping out the Spanish missionaries (they come to my door regularly now, even though I don't particularly like their version of tamales).

I don't think the rice I bought resulted in less low-cost rice for others in my community, because the price increase isn't done on a bag-by-bag basis where they wait for all the rice at one price to be sold out before making a change. Pricing is done for the whole category and involves simply updating their computer and putting a single new label out on the shelf. The price change can come at any moment. And when I left, there was still plenty of rice left for others to buy, as far as I could tell.

I would encourage all of my readers to bargain shop, whether it's food, automobile, clothing, stocks, precious metals, real estate, etc. On the other hand, if someone is foolishly selling something at an unfairly low price out of ignorance, there are times when it is appropriate to explain that the price is too low and offer something more in order to be fair. I don't think I feel that way about my purchase at Aldi, though.

While I stew over the possible guilt of my bargain shopping, I hope the rest of you will continue building up your food storage, recognizing that the high prices we have now may prove to be the lowest you'll see in the coming years. There were some concerted moves this past week to strengthen the dollar and knock many commodities down, but the long-term dynamics call for many more upward moves. Buy now while things are cheap!

Bookslinger said...

RWW, though your response is well within Libertarian and market-based economics, LDS are likely going to need to justify buying extra food for storage purposes in times of rising prices or scarcity.

LDS-type food storage in many parts of the world is already illegal.

By the way, the use of corn based ethanol for fuel has already caused corn prices to increase significantly in the western hemisphere. Lifestyles of poor people in Mexico _have_ been affected by our use of ethanol in gasoline. And there haven't been enough additional acres of corn planted to compensate for the corn diverted to ethanol production.

Jeff, it is still possible for Aldi to know when the last bag of rice at the old price has been sold, and to then update the price the night after that occurs. The actual bags may be switched around on the shelves, so you're right that it isn't exactly on a bag by bag basis. But if they get in a certain lot of X bags of rice, they know when those X bags are sold, and may delay the price increase until the old lot is effectively sold off.

We don't know for certain if the "old" rice on aldi's store shelf receives a price increase as soon as the "new" rice hits the warehouse or distribution center. It depends on whether their pricing strategy is based on actual cost or replacement cost. (I used to write software for inventory control.)

You didn't say how much you bought, and I was envisioning you taking home 50 to 100 pounds at once.

There are still plenty of other bargains to be had for food storage. Our local grocery chains still occassionaly have sales on canned vegetables for $.50/can. Last I bought Campbell Chunky soup on sale it was only $1.00/can.

Looks like this will be a good year to put in a big garden.

Just think, could millions of LDS families living in the US, planting gardens, and eating the food therefrom, have a positive effect on world-wide food prices?

Anonymous said...

Bookslinger: Your comments/opinions make me think of one word: Socialism.

If I'm not intelligent enough to understand that I need to be prepared, how is that Jeff's problem?

The truth is, we (the people) are not stupid. We make the decisions we do because we have the right to do so. We make a choice to be prepared - or not. No excuses. And yes, I do have a garden started.

hopeforabetterworld said...

This has been a productive discussion, I think. Looking out for oneself and one's family, as well as for others beyond our immediate spheres of influence, are firmly grounded principles of the gospel. Thank you for the thoughtful, respectful comments that have been made, and how different sides of the issue have been presented (though some of the comments made are more respectful than others, I feel I should add).

-SLP (whose own vision is admittedly limited in scope)

Anonymous said...

Bookslinger, said:


"There may have been a struggling Hispanic or Asian family in Appleton who would have bought that bag of rice, and whose economic circumstances would have benefited more (relatively speaking) than yours."


I think a little less self chest pounding and back slaping. How could you get from bargan shopping to depleting some pour family of food. You eather have to much time on your hand a very strange way of viewing the world. I prefer Top Ramen then buy other things on sell to add to it. I always buy bulk and on sell or if things are going up. Now I have to feel guilty about hurting some pour family. All this type of talk reminds me when I joined the church and found out that the church, Utah, or some leaders were against Unions. I felt guilty for years as a convert thinking that being a Union member and having a Union job some how made me guilty of something. My little nothingness is hardly going to hurt to many poor.

Mormanity said...

Bookslinger's points are welcome and appreciated - something new to consider. Social responsibility takes many forms, and I don't think he's advocating socialism. But I do think that it would be dangerous to try to use food storage to offset rising prices in food - the fact that prices are rising may be pointing to a growing shortage that makes it all the more important to prepare for the real crisis that may be ahead. It would be terrible to have spent a couple years depleting food reserves in order to be socially responsible, only to find that famine was around the corner and you are left unprepared and unable to help your family and neighbors.

I say the responsible thing to do now is to steadily stock up while we can still buy anything at all! Yes, I suspect very grave times may lie ahead for at least some parts of the world.

I also see our nation headed steadily for the kind of economic disasters that have hit every society that allows its money to become debased. Remember Weimar!

Bookslinger said...

Jeff, thanks for seeing the bigger picture that I was trying to draw.

And your counterpoint is well-taken, that the recent price increases in grains may not be temporary, and could be indicative of future shortages which will indeed necessitate actual use of one's storage. And thanks for reminding others that social responsibility is not the same as socialism.

To others: my remarks were based on several things in the background:

- Jeff already having a one-year's supply on hand, thereby making his recent purchase an "extra" kind of thing.

- what if tens (or hundreds) of thousands of people (LDS or not) started suddenly adding significant amounts of grains to their food storage, what effect would it have on those who need to make weekly purchases to survive?

- that those who had already heeded the prophets' calls to have a one-year supply wouldn't be worrying so much about the current price increases.

- I admit that there was a teensy bit of teasing intended towards Jeff.

- And Jeff made a correct point: if Aldi uses "replacement cost" and not "actual cost" in their pricing strategy, and was going to impose a price increase on the "older/cheaper" rice on the shelf anyway, then he is correct that his purchase of the "older/cheaper" rice would have virtually _no_ effect on other local consumers.

Bookslinger said...

Here's a better example of the scenario I was trying to paint.

I often shop at Big Lots, a close-out store. Sometimes they have really good bargains on food, and I'm tempted to buy up every box of a given item because it's a super deal and I regularly use that item. However, that item at that price is limited to what's on the shelf, there isn't going to be a replacement. And if they do re-stock it in the future, it won't be at that price.

So, what think ya'll? Should a few affluent people go into close-out stores and scarf up all the deals, or leave some deals for people who are struggling paycheck to paycheck?

Remember, this isn't the same as a big chain grocery store who can restock Campbells soup from their warehouse if one store has a run on it while they're having a sale that week. This is a close-out situation, and when it's gone, it's gone, and the sale is over as soon as it's gone.

Do you grab all the savings for yourself (an affluent family like Jeff), or do you leave some on the shelf for others? And remember, you already have a one-year's supply for your family.

Me, I'd probably call some of my friends who I know are bargain-shoppers, and let them in on it.

Now, relating this back to the big picture...

Worldwide grain reserves are going down. This has been reported in the news. Not just rice, but corn and wheat. It's also been reported that US farmers will plant less corn this year than last year. (Though last year was a record year.)

So the big picture has changed. We are not in "surplus years" any more. The world is currently consuming more grains than it is producing on an annual basis. Production is not keeping up with consumption, hence the reserves are starting to decrease.

Part of this is due to India and China having a growing middle class which is consuming a lot more meat than they have previously. They are becoming more and more like the United States. (Which is good, I believe.)

But along with the transition to a meat-eating middle-class, comes a greater increase in grain consumption. Because those animals being eaten consume more grains than if the people had eaten grains directly.

(Hmmmm, anyone starting to see a tie-in to the Word of Wisdom?)

India and China probably still don't consume as much meat per capita as the US, but the shift to a meat-eating middle-class is claimed to be partly responsible for the decrease in worldwide grain reserves, and the increase in prices.

So here's another thing LDS can do to be socially responsible (not socialist!), eat meat sparingly.

Gee, where have I heard that before? :-)

Bottom line: Jeff is right in that you should start building up your year's supply if you don't have one yet. Get serious about it.

Information here.

Ryan said...

Some thoughts:

1. I honestly have no clue why corn-based ethanol is getting any traction. Everything I've read indicates that it's actually worse than burning gasoline when you factor in the cost of growing and processing it (corn is a particularly resource-intensive form of farming).

2. I *really* wish I still had the citation, but I read once that the grain wasted -- er, fermented -- for alcoholic beverages in a year could make every human being on the planet a 1 lb. loaf of bread every day that year if those resources were used for growing wheat instead. Can anyone confirm or verify?

3. Re: illegal to "hoard" food in some countries. I've heard of this as well, and it doesn't make very much sense to me. If the economy is working well enough that people can buy the goods, it doesn't really matter whether you save some extra for a rainy day. If, on the other hand, things are going so badly that you can't buy them, why in the world would it make sense to rely on an obviously broken system for your well-being? (Note: the charitable person would be sharing their "hoard" right about then, BTW).

4. Next time you buy a smoothie, pay attention to where the other half of the blender's contents goes... I suspect the shameful way we affluent nations waste food has a far greater aggregate effect on the poor than bargain shopping or (even badly-timed) food storage. Heck, just imagine if every obese American cut 500 calories a day from their diet... the resulting surplus could take 50-60 million people from 0 to 2000 calories a day.

Anonymous said...

what if I no longer was a live the I would not have to feel guilty about my carbon foot print and helping to kill off thousands.

Bookslinger said...

I haven't suggested anything socialistic nor mentioned anything about carbon footprint. I don't think others have either.

Please don't read stuff into comments that aren't there.

Anonymous said...

"carbon footprint"


I was Just making reference to the collective guilt that we all must feel if we buy some rice because we know that the price is going to go up and keep some pour person from eating. Carbon foot print was to be snarky. If Jeff wanted to rent a truck and back it up and buy all the rice before it went up 30% and then sell it in his front yard (after getting the proper business lic. ect.) who should feel guilt for this. The point I got from his post was it is a good time to buy rice and rethink food storage. And yes I understand all of your points Bookslinger I have a bussiness degree. To me his post was a helpful warning and reminder that then took a turn to how we should feeling some new Morman guilt trip about(what if we all ran out and but up all the rain coats then the poor would be left out in the rain) guilt. If I knew anything was going to rise 30% on a set day I would do my best to make money from it then I would pay my taxs and tithing and give some to other charities and give my family a better life. I don't care much for those that can't get there a head of me. Well maybe a little like most Christians and Mormon that have given a life time of service to good works. Like you and Jeff.

Ryan said...

Check this out: http://www.msnbc.msn.com/id/23832071/

Reasons for rising prices in the Philippines:
1. Rice paddies replaced with housing, golf courses and cash crops over the last decade
2. Diseases, disasters cut production
3. Exporters stockpile rice hoping prices rise even more (while simultaneously paying farmers less than before)

Fun.

RWW said...

If only market forces were allowed to operate fully, we wouldn't likely be having this discussion.

Anonymous said...

If only market forces were allowed to operate fully there would only be the rich and the poor. As much as I dislike goverment they must regulate those that would enslave other men.

SH said...

Not to side track this thread, but I also see evidence of hard economic times coming. I definitely don't begrudge Jeff his rice, but our family is finally settling down enough to begin the process of food storage. No, we aren't young 20-somethings, my husband is 28 and I am 33 and we have cautionary note for all of the parents of teenagers out there.

The message we are trying to get out to anyone who will listen is that an occupation or trade is far more important for a young man then an "education." I put that in quotes because education is what you make of it and doesn't have to be gained in school.

Our story began when my husband's parents insisted he not enroll at the local technical high school for millwright or finish carpentry classes. Instead they required him to take AP classes. He barely passed those classes and the associated tests and had no further interest in classroom education. Nevertheless, being a dutiful son he proceeded to college because his parents were convinced that people with college educations make lots of money. He succeeded at some classes, failed others and went on a mission. When he returned from his mission he worked for a year and then began the whole process over again, twice, once after marrying me.

My husband is very bright, multivariable calculus and linear algebra were among the classes he did well in. Our conversations at home revolve around advances in medicine and science, politics, economics, engineering, and philosophy. (We love wikipedia, though we do check for other points of view on any topic we are discussing.)

We have student loans. We have credit card debt from all the times we didn't have money for diapers, or we had to buy supplies for this new possible occupation. We owe my father-in-law money because he doesn't believe in providing his sons with post high school training of any kind. (Though he is sure that a college degree is a magic ticket to the easy life.) We have just barely been able to buy a house, thus ending our vagabond lifestyle of the last 5 years. We have no money left once we pay our bills and meet our needs but somehow we will find a few dollars to buy some food storage with because we believe in following the Prophet.

My husband is very frustrated. Every day he meets people who did take the trades path he was looking at in high school, and they all make more than he does with less debt and are more able to support their families because of it. (Incidentally, I have a college degree and it is worthless. We also know people with college degrees who are working as cashiers and burger flippers.)

So we plead with those who have teenage boys, irregardless of what education you expect them to achieve, be sure they have an occupation that will support their family.

Bookslinger said...

Corn prices are up 30% this year too, to a record $6/bushel.

http://www.startribune.com/business/17268779.html

Bookslinger said...

And in February of this year,
soybean futures hit an all time high. Current price is down from that, but still.

http://www.agweekly.com/articles/2008/04/03/news/markets/markets37.txt

RWW said...

SH, your points are well-taken. Though I myself have a PhD, I plan to encourage my children, as much as possible, to avoid formal education.

SH said...

I should clarify. I'm am definitely not against education, even formal education. But when our son is older we will counsel him to go as far with his formal education as we can reasonably afford, and, at the same time, find a trade he enjoys and learn a skill.

What we will not do is go into debt for any level of education. We will counsel him to not use debt except for the purchase of a reasonably priced used car and a reasonably priced home.

Reasonably priced is something he can afford on his worst case income. We are trying to hold to that too which is why we waited until we were able to find a home where the entire payment, with escrow, was about the same amount as the rent we were paying. And our rent was about 25% of our income.

(Now, if the economy will just hold out for a few more years...)

Bookslinger said...

It must really be bad. It seems that Jeff is actually asking people to send him rice.

(Sorry, couldn't resist.)

Bookslinger said...

Yikes, prices up another 10% on April 4, 2008.

Bookslinger said...

April 8, 2008. Bloomberg reports more instability and higher prices in the rice market. Conflict and civil unrest in various countries around the world due to rising food prices. Philippines cracks down on hoarding, calling it "stealing from the people" and threatens jail.

Bookslinger said...

Here's a link where you can take a vocabulary quiz, and for every correct answer, they donate rice through the UN World Food program.

http://www.freerice.com/

Anonymous said...

SH, said,


"So we plead with those who have teenage boys, irregardless of what education you expect them to achieve, be sure they have an occupation that will support their family."

I have to agree with much of what you have said. Be sure as best you can that college is the best path. I have a business degree and went into the trades and will be retiring early and doing well. Work hard, save, and invest the best you can. Many times decisions you make can be more important that your education. A little luck or good breaks help. The thing about the trades is that business and the your goverment is off loading them as fast as they can. Good luck. I know I would not want to be just starting out in the United States as a worker now. Not to sound like a nut job but over my 30 plus years after high school I have watched the country slowly be sold out to those that will pay the most. Every time I see my mothers grand kids I tell them how sorry I am that we are leaving them with such a mess they are going to have to clean up.

RWW said...

The Mises blog has a good article today about the economics of speculators (i.e. people who buy food ahead of shortages).

RWW said...

Sam's Club is limiting rice sales because of the worldwide shortage.