April 25th, 2008
07:46 AM GMT
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NEW YORK - Americans woke up Thursday morning to some shocking headlines. Some of the country's biggest warehouse retailers were limiting how much rice customers could buy.

Rice restrictions at a Costco store in San Francisco.
Rice restrictions at a Costco store in San Francisco.

Sam's Club, a division of Wal-Mart, said customers would only be allowed only four 10-kilogram (20lb) bags of jasmine, basmati or long grain white rice. Its competitors, Costco and BJ's, were also said to be contemplating limits. Food rations of any kind are unheard of in the U.S., so this was very big news indeed. For at least a little while.

It didn't take long for everyone to figure out the rice shortage was mostly media hype. Yes, some warehouse discounters seem to be experiencing inventory issues as small businesses and restaurants stockpile to avoid higher prices. But the majority of supermarkets have no restrictions whatsoever. Unlike places like Haiti and Egypt where real shortages have resulted in riots, in the U.S. rice is readily available. Expensive, but available.

That doesn't mean the news reports aren't useful. There is a school of thought in financial circles that when the media finally sits up and takes notice, the tide has already turned. This may be true for commodities. After making a record run at $120 a barrel Tuesday, crude oil fell $4 in Thursday's New York session before finally settling around $116 a barrel. Gold fell to a four-month low. Rice prices stayed close to record levels, but wheat, corn and soybean futures all moved lower.

Global consumers could clearly use some relief from sky high fuel and food costs. But investors who have exposure to the commodity markets might want to take profits and take cover. An oil trader I spoke with in New York warned crude was no longer trading based on the rules of supply and demand. Instead, he said oil had now become a financial tool. Farmers have complained the same is happening in grain markets. Speculators are in the driver's seat. Up till now they have been buyers. If that changes, the sell-off could be swift and painful.

soundoff (12 Responses)
  1. Possible Solutions by Understanding Capitalism

    Why have rising costs not hit America???

    Apparently not because of surplus inventory says one expert.

    We need to realize that our North AMerican stomachs are competing fore inputsfurther down the vertical farming stream from grains to livestock growing appetites of the developing giants (and they have the right to develop tastes for luxury goods just as the developed world, 2. and biocrops also require the same land, water...

    April 26, 2008 at 12:36 am |
  2. navneet kamboj

    If somebody thinks its the media hype regarding shortage of food products and food crisis then the same person needs to give it a second thought. Global food crisis are not just about to show their effects but they have started to show it. The largest exporting nations such as Thailand, India, Brazil etc have stopped the exports of rice and wheat. Every nation whether developed, developing or under developed will witness food shortage of basic commodities. Not a media hype readers....

    April 26, 2008 at 5:10 am |
  3. Jon

    The current prices of gas/oil will only continue to rise until the American people are paying $5.00/gal. This is another policy of G. Bush and the Executives he met with at the beginning of his first term. Does anyone remember the big secret meeting in Washington? Just what do you think they were planning?
    All of the oil companies should be "NATIONALIZED" right now, it is a matter of National Security. The oil speculation market should also be "NATIONALIZED" to control the price of crude. Unless you believe the few should benefit over the many.

    April 26, 2008 at 12:22 pm |
  4. T. Rice

    Your last assumption that commodities could go a through a "switf and painful" sell off is obsurd considering you offer absolutley no reasoning of why except for the opinion of an anonymous oil trader. Where are your fundimental reasons for the decline?

    April 28, 2008 at 12:29 am |
  5. Whitney

    Perhaps if farmers, health organizations and grocery stores had the foresight to predict food shortages and limited the amount of food one could purchase this would not be happening. Furthermore, I feel this is indicative of the correlation between obesity in the United States and a lack of food around the world. Absurd. How much food does one really need? It's the costco, walmart's, and bj's of the world that have marketed so well excessive consumption. Moderation for a global nation!

    April 28, 2008 at 6:53 am |
  6. Neela

    The food crisis is not only hitting the US it is hitting the whole world. We need to stop the animosity among our neighboring countries. It is time we stop the war that is wasting the countries money and taking innocents lives. It is time each country focuses on their issues. That would help our staggering economy get back up and running.

    May 1, 2008 at 12:56 am |
  7. Rob

    Lets charge the world the same cost for grain as OPEC charges for oil......and see who lasts longer. Survival of the fittest. Sempre Fi.

    May 1, 2008 at 2:09 am |
  8. Al from NY

    A discussion of oil for home heating is long overdue! So far surviving winter hasn’t been raised as an issue. Say oil and most people immediately think gasoline. Fuel oil to heat our homes, though abused by some, isn’t a luxury to most of us as cars are to many. In much of this country oil is essential to heat our homes. Where it’s available natural gas can be used but it’s price tag will keep pace with oil’s, as will the cost of heating with electricity. The fuel to heat our homes is on the way to doubling before next winter. Supply and demand are given as the reason for rocketing gasolene prices. Unfortunately, so far no one can control supply and demand when it comes to the heating demands placed upon us by mother nature, the weather. Will oil be diverted to heating away from gasoline this winter to drive gasoline and food prices higher? When you can no longer afford to heat your home, get to work,or feed your children, what are the alternatives?

    May 29, 2008 at 3:09 pm |
  9. Ron Tan

    Dear Sir,
    The best way to overcome this crisis is to stretch that litre to more
    km per litre or more miles per gallon by efficiency of combustion.
    Energy conservation is the weapon against hike in fuel price.

    May 30, 2008 at 2:20 pm |
  10. Ron Tan

    Dear Sir,
    The theory of science defines combustion as inefficient, anywhere
    except in a controlled lab environment.This being the case, all the
    energy we use today can be said, to be used inefficiently resulting
    from inefficiency in combustion.Infernofuel uses spintronic race
    track technology in liquid to enhance combustion efficiency in
    fossil fuel like gasoline and diesel, and also enhances the
    intake of oxygen.To combat the current oil crisis in terms of
    price and depletion of oil resources,is to use the existing oil
    reserves available efficiently by enhancing combustion efficiency
    to stretch that one litre of fuel for more miles per gallon.
    It will also help reduce co2 emission. http://www.infernofuel.com

    May 30, 2008 at 8:28 pm |
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