President Bush Can and Should Do More to Address the Food Crisis: Let Japan Sell Its Rice Reserves

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 1.5million metric tons of rice that it has in storage. About 600,000 tons isThai and Vietnamese long-grain rice (high quality) and the rest is US mediumgrain (good rice). All of the rice is in Japanese warehouses because of anagreement with the World Trade Organization, and the U.S. as "cognizantobserver" of the rice agreement, would need to approve the sale of boththeUS and the Thai/Vietnamese rice. Japan currently cannot release this riceto the World Food Program (or to the world market) without permission fromthe 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 wouldlikely come down to $600 per ton within a week. The speculative bubble willbe pricked, and hoarding will stop. Exporters will start selling again, andwe will likely return to what will be "normal" rice prices goingforward-about $600 per ton. This is of course much higher than two yearsago, but a far cry from the $1200-1500 per ton we are likely to see if thePhilippines and other countries continue to buy aggressively in worldmarkets.

We commend President Bush for his efforts to increase funding for emergencyfood aid but remind him that much more can and should be done to address thecurrent dire situation.