Politicians across the globe have similar tendencies when it comes to elections and getting votes. Till now, we have been hearing about politicians in South India, who keep on showering goodies after goodies to the voters. In the recently heavily contested electoral battle between Madam Jayalalitha and Mr. Karunanidhi - both parties tried to outdo each other. This freeby war has its roots in earlier elections when DMK gave away free colour TVs. Some politicians also promise rice at ~Rs2 a kg; which has become a symbol of appeasement especially among the rural poor.
IIFL Singapore Research team (IIFL’s Dumb Commodities report by Billy Wong and Zuo Li) has come out with an interesting report on Rice and why Rice prices will rise, thanks to recently concluded elections in Thailand. The winner Yingluck Shinawatra won the election on the plank that she’ll pay all Thai farmers 15,000 Baht per tonne of rice. This is almost 67% higher than the going rate of 9,000 Baht per tonne. Needless to say, this will have serious inflationary implications not only for Thailand but for the rest of the world. Thailand is the world’s largest exporter of rice, as well as rice prices are bench-marked against the Thai rice.
May be this kind of largesse is something to do with the diet. Tamilians as well as Thai’s eat a lot of rice. Ms Yingluck’s policy would have dire consequences for poor rice importing countries such as the Philippines, Indonesia and Bangladesh. These countries have large low-income population, reliant on rice as staple food. A steep spike in rice prices would be devastating, although the respective governments are likely to chip-in with subsidies.
At least now, the Indian Government can rightly and correctly blame the foreign hand for spiralling food inflation. And for once the BJP will also look at the leading ladies from abroad who tend to hamper and impact the progress of India. We can’t even survive on Love and fresh air given the saffron brigade’s objections to Valentines’ day. Mamta Di will start screaming true murder, and ask for central subsidies to make sure that rice prices in Bengal are kept under control. And she’ll need extra support to make sure that there is no attempt by Bangladeshi refugees to eat more and more of rice.
We will now have one more problem for the finance minister, food minister, as well as the Prime Minister. Soft food inflation will not come under control, and I doubt if RBI has any aces up its sleeve to prevent people from eating rice, apart from the usual 25bps rate hike.
We have so much of our food grains rotting in the warehouses; we should start exporting it to make sure that the trade deficit can also be brought under control. I think the Rice-related companies listed on our bourses will be interesting proxies to play on the rice story.
Man may not live by rice alone but a rise in the price of rice would be hard for the world to digest.