Dollar trap to push up rice prices

A weak US currency is expected to put fresh pressure on rice prices just a year after a global supply crunch caused the cereal to rocket above $1,000 a ton, the International Rice Research Institute (IRRI) said.

The situation “suggests that a falling dollar will keep rice [and commodity] prices higher,” according to the latest edition of the institute’s bimonthly publication Rice Today.

The Philippines-based research institute reported that there is a “sense of false comfort” as the price of the staple falls back to normal levels.

Exporters of lower grade rice “find it hard to look for markets” while the financial crisis has pinched credit and importers are taking a “cautious approach to stock-building,” it said.

But the institute said the dollar was expected to “weaken in the coming months” as US debt builds up and fiscal policy spending puts more pressure on the currency, which it said leads to a “dollar trap” where “the value of several countries’ reserves will become lower.”

India factor

On the other hand, India’s expected return to the export market should help ease prices.

“We expect a pitched battle between the current negative sentiment that draws prices lower—especially with India possibly returning to the export market soon—and the US dollar, whose value is shaped by the global and US economies. The result of this battle will mark price trends,” it added. — AFP