Rice Price Crisis: Causes, Impacts, and Solutions

A rapid increase in food grain prices in the first half of 2008 has diverted global attention to the food crisis. Rice, the staple food of millions of Asia’s poor, is not only an economic good but also a political commodity. The price of rice escalated in May due to a number of shortand long-term factors, with the export price exceeding USD 1000 per ton.

Keeping the price of rice low, thus making the commodity affordable to the poor, is critically important in reducing poverty. Poor households spend a substantial portion of their incomes on rice; an increase in rice price is equivalent to a reduction in their real incomes.

This paper analyzes the factors that have contributed to the rapid rise in rice price and assesses the impact of price upsurge on poverty. A scenario analysis on rice prices was conducted through projection of long-term demand and supply of rice. The final section of the paper includes short- and long-term solutions to the price crisis.