Tags: Food Shortage

Myanmar Cyclone Puts More Pressure on Already Strained Global Rice Market

By , Money Morning •

By Jennifer Yousfi
Managing Editor

Cyclone Nargis ripped through the Southeast Asia nation of Myanmar on Saturday, leaving 22,000 dead and the country's rice crop in ruins.

Myanmar, known as Burma until its independence in 1948, is one of the foremost exporters of rice with approximately 400,000 metric tons exported last year. While that figure is no match for the 9 million metric tons exported by its neighbor Thailand, the cyclone's damage to the country's fertile Irrawaddy delta came at a critical point in the rice harvest.

Story continues below...

"The cyclone certainly complicates matters," Paul Risley, a spokesman with the World Food Program in Bangkok, told The Wall Street Journal. "It blew through the critical rice-growing areas of the country and it seems the harvest was only partially completed. This could represent a substantial loss to the country's rice output."

The timing is particularly devastating due to the soaring cost of rice, which makes up a large portion of the diet for half the world's population. While rice prices have come down slightly in the past several weeks, the price is still three-fold what it was prior to the start of the year.

Only 7% of global rice production is traded internationally, which means any government intervention in the export or import markets could have a dramatic impact on rice supply and prices. And that means the global rice market is especially sensitive to natural disasters as well.

At a time when international aid organizations such as the United Nations' World Food Program are struggling to deal with rising food costs, the devastation will stretch already thin food reserves as organizations work to meet the needs of those displaced by the cyclone. Prior to the disaster, the U.N.'s World Food Program had already stated soaring food prices would leave a $755 million shortfall in its $2.9 billion budget, forcing cuts in vital programs.

Even more troubling, at a time when nations such as India are already limiting exports, the damage from the cyclone could turn one of the last remaining rice exporters into a rice importer if Myanmar's rice crop can no longer feed its 53 million citizens.

"If post-harvest losses turn out being large, localized food shortages in the short term may result," The Food and Agriculture Organization said, Reuters reported. "Such losses could also impair the country's ability and government decision to export rice in 2008."

The FAO had expected Myanmar to export 600,000 metric tons this year.

With rice trading at $920 a metric ton, the potential loss in export income could be devastating for a country that was already on the U.N.'s watch list of 30 countries that could be adversely affected by the soaring costs of food staples.

News and Related Story Links: