Global Development: Views from the Center
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May 01, 2008
President Bush Can and Should Do More to Address the Food Crisis: Let Japan Sell Its Rice Reserves
Posted by Peter Timmer at 06:26 PM
This posting is joint with Vijaya Ramachandran
Today, President Bush called on Congress to provide another $770 million in food aid, in addition to the $200 million already allocated through the Department of Agriculture,in order "to keep our existing food aid programs robust."
There is no doubt that these additional funds are much needed to purchase and distribute food to those who are suffering greatly from the current spike in food prices. But the U.S. can and should do more. Specifically, the U.S. must allow Japan to sell, at full cost on Japanese books, the 1.5 million metric tons of rice that it has in storage. About 600,000 tons is Thai and Vietnamese long-grain rice (high quality) and the rest is US medium grain (good rice). All of the rice is in Japanese warehouses because of an agreement with the World Trade Organization, and the U.S. as "cognizant observer" of the rice agreement, would need to approve the sale of both the US and the Thai/Vietnamese rice. Japan currently cannot release this rice to the World Food Program (or to the world market) without permission from the U.S., and the Bush administration is yet to move on this.
If Japan is able to release this stockpile of rice, world rice prices would likely come down to $600 per ton within a week. The speculative bubble will be pricked, and hoarding will stop. Exporters will start selling again, and we will likely return to what will be "normal" rice prices going forward-about $600 per ton. This is of course much higher than two years ago, but a far cry from the $1200-1500 per ton we are likely to see if the Philippines and other countries continue to buy aggressively in world markets.
We commend President Bush for his efforts to increase funding for emergency food aid but remind him that much more can and should be done to address the current dire situation.
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