Lessons for Sri Lanka as futures prices show no ‘shortage’ of rice

April 21, 2008 (LBO) – An examination of futures prices show that there is no ‘shortage’ of rice, but government meddling in rice production and marketing is causing other negative fallouts, a top economist has said. Steve Hanke, from the Johns Hopkins University of Baltimore in the United States, says the term structure of Thai rice which is showing an upward sloping curve shows that there is no ‘shortage’ of rice.

“Given the recent food riots, the surge in the volume of news coverage about rice shortages and the political panic about rice policies – this news from the futures markets strikes a dissonant cord,” Hanke wrote in an upcoming May 2008 issue of the Indonesia based GlobeAsia magazine.

“The economics of commodity markets provides the key to unlocking this mystery.”

Broadbased Boom

World media is rife with stories of food ‘shortages’ and ‘crises’ amidst a global commodity boom fired by loose monetary policy particularly in the United States which has sent the dollar plunging and excess money seeking profits in commodity speculation.

The International Monetary Fund has said a ‘broad based’ boom covering, food, beverages, metals, minerals, energy and precious metals of