Fears of food inflation have gripped much of the world but one food staple is defying all others - rice.
Global rice production is expected to reach record levels this year, topping a banner year in 2010. And, while prices for wheat, corn, soybeans and almost every other agricultural commodity have been rising in recent months, rice prices have fallen.
The three benchmark prices for rice - based on varieties grown in Thailand, Vietnam and the United States - have dropped in the past two months by as much as 8 per cent. Thailand's benchmark "100 per cent B grade" white rice, considered the main barometer, has fallen by roughly 50 per cent since it peaked in 2008.
The UN Food and Agriculture Organization (FAO) has highlighted rice as a key bright spot amid growing concerns about food inflation. The FAO's monthly food index has hit record highs and every grain the agency tracks has been climbing, except rice. The agency has said that without stable and falling rice prices, the world would likely be seeing more food riots.
"We are in a fairly comfortable situation," said Michael Creed of Creed Rice Co. Ltd., a Houston-based rice broker. However, Mr. Creed noted that sustained high oil prices could have an impact on rice prices in coming months.
The main factor keeping rice prices down has been an abundance of supply. Bumper crops have been reported in major growing countries such as Thailand, Vietnam and India. More importantly, big consuming nations, such as the Philippines and Indonesia, have had good crops as well, meaning that both countries will cut imports.
The Philippines, the world's largest rice buyer, expects to slash imports by half this year and Indonesian officials have indicated their country won't need to buy any rice at all.
Rice production has been helped by improved farming methods in many countries and new hybrid seeds developed in China that can boost crop yields by as much as 20 per cent.
Rice is a critical commodity because feeds so much of the world. About three billion people - more than half the world's population - depend on rice for most of their daily food needs.
But the rice market is unlikely any other and it is fraught with political overtones. Most of the rice grown doesn't trade internationally; instead, it is consumed domestically, usually within 25 kilometres of where it is harvested. Countries such as India and China are major rice producers but export much less than the Thailand or the United States, both of which grow far more than is needed domestically.
Because rice is such a key food, many governments restrict or even ban exports to keep local supplies strong and domestic prices down. When prices began to rise in 2008, several major producers including India, Vietnam and Cambodia, imposed export bans. That sent prices higher, even though global rice production had actually increased from the previous year.
"That was an artificial situation," Mr. Creed said. "It really was not so much a shortage of rice but a shortage of offers of rice. You couldn't get anybody to offer because everybody had an export ban. And, it quickly corrected."
Rice isn't the only agricultural commodity whose supply is growing. A report released Thursday by the U.S. Department of Agriculture (USDA) forecasts a 2-per-cent rise in global wheat stocks this year and slight increases in corn and soybean stocks.
The USDA report sent the price of many commodities down Thursday. Corn and wheat fell 2 per cent on the Chicago Board of Trade and both have been falling steadily for days. Wheat prices have dropped 11 per cent this week and corn has fallen during five straight trading sessions. Rice futures fell nearly 4 per cent Thursday in Chicago, hitting a four-month low.