March 3rd, 2011
02:21 PM GMT
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(CNN) – In the face of inflation and soaring oil and food prices, at least one food commodity is staying steady. That would be rice, says the Organization for Economic Cooperation and Development, or OECD.

And the price of rice is staying nice for three simple reasons: stockpiles are near seven-year highs; global output for this year is predicted to hit a record; and good weather has spared crops around the world.

Thanks to all this, the global trading price of rice has inched up by just 3.4% over the past twelve months, according to the Chicago Board of Trade. In contrast, the price for wheat jumped a whopping 60% in the same period. Corn prices popped an astounding 90%.

The biggest factor for bountiful rice harvests this year? Good weather, says an analyst at JPMorgan Chase. Basically, getting hit by bad weather is like playing roulette. In 2008, rice riots during that year’s global food crisis were due to droughts and floods that just happened to hit rice-producing regions. Not so this year. Supply is up because weather has been kind, so the price of globally-traded rice has remained stable. But here I have to stress “globally-traded.”

So is rice a stable staple, as the OECD’s 3.4% inflation figure might imply? Apparently not as much as we are led to believe.

Sumiter Braca, a Policy Officer at the U.N. Food and Agriculture Organization in Bangkok, explained reasons behind this. For one, the OECD number only measures rice that’s traded across borders. In the past year, that amounted to just 7% of total rice production – a very small amount. That means about 93% of all the rice that’s produced each year gets eaten right in the country where it’s made. And when we do a country-by-country comparison of rice inflation, that’s where we see the global inflation number fall apart.

From January 2010 to January 2011, China actually saw a sharp rice price increase of 20%. In that same period, Bangladesh and Indonesia saw rice prices rocket about 30%. India had a 10% increase. Thailand, the world’s largest exporter of rice, saw a 15% jump.

And it is government intervention that is behind this wide price spread - various subsidies, taxes, or import and export bans on the grain. Basically each government can, and often does, manipulate its price of rice.

This begs the question: is the OECD’s 3.4% rice inflation number right? Yes, it is the truth. But it’s only part of the truth and only from a global perspective.

When we tease each country out from that little number, we realize inflation rates can be hugely different and in some cases much higher than the global “3.4.”

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