Quotes of the Day

At around 5 p.m. on April 2, local police and officers from the Philippines National Bureau of Investigation descended on a four-story warehouse in suburban Manila. They were acting on a tip-off about possible illicit activity. But the agents weren't searching for drugs or knockoff Rolexes. They were looking for rice. The inspection was part of a nationwide effort to nab profiteers who, taking advantage of sky-high prices for Asia's most basic food, are suspected of repackaging government-subsidized rice and reselling it at higher market rates. Officers have had some success, discovering 27,000 bags of rice at one warehouse, according to Rex Estoperez, spokesman for the Philippines National Food Authority (NFA), which distributes subsidized grain. "Another warehouse was caught in possession of many, many [empty] NFA sacks," says Estoperez. "So where did the rice go?"

That's a question millions of Asians are asking. Across the region, the price of food, from wheat to pork, is increasing at dizzying rates. But it is rice, the foundation of Asia's diet and a potent symbol of its cultures, that is causing the most anxiety. In Thailand, Vietnam, Bangladesh, India, Pakistan and elsewhere, the price of rice has doubled in the past year, a hike that hurts all the more because Asian families often spend half of their weekly budget on food, more than double what Western households spend. In an effort to contain spiraling domestic prices, major rice producers, including India and Vietnam, have sharply curbed exports — disrupting global supply chains, fueling more inflation, and prompting rice hoarding and panic-induced shortages. Asia is experiencing one of the uglier aspects of globalization: as countries have become increasingly reliant on one another for vital products, they have also become more vulnerable to external shortages and price spikes as they ripple around the world.

It's one thing if you can't find pork at your local market. You can always buy chicken. But rice has no good substitute in many Asian diets. In Mandarin, the word for rice is also the word for food. The Thai phrase "to eat" translates as "eat rice." "Rice isn't just another commodity," says Robert Zeigler, director general of the International Rice Research Institute in Manila. "In Asia, rice has cultural, social and, in many places, even a religious role, so it carries much more psychological weight." Indeed, Asian nations have reacted to the mere prospect of shortage with something close to hysteria. The Philippines government has threatened to charge rice hoarders with economic sabotage — a crime punishable by life imprisonment. In Manila last week, armed soldiers distributed cheap bags of rice from the backs of military trucks to residents queuing in the midday sun. In Thailand, the world's largest rice exporter, some stores are limiting sales to three bags per family to prevent shoppers from emptying shelves.

Global Exposure
The world still grows plenty of rice, more than 420 million metric tons last year, according to the U.S. Department of Agriculture. But prices are spiking for several reasons: rising long-term demand in countries such as China and India, where millions of increasingly prosperous people are eating more; short-term supply shocks thanks to unusually cold weather and pest infestation in Vietnam, the world's second largest supplier of rice; and the diversion of a huge chunk of America's corn crop to ethanol production, which has boosted demand for other staples, including rice.

But economic dynamics, as they play out in national markets, can be even more complicated. Take India, for example, where rice prices are rising fast, contributing to 7% inflation last month, the highest in more than three years. The country is not suffering from a classic case of tight supplies. National rice production this year should hit 94 million metric tons, up more than 2 million metric tons from last year and more than 20 million metric tons from 2003's crop, which was devastated by a bad monsoon. Nor have shortages hit a government-run rice-distribution program that helps feed India's poor. That program bought 20.6 million metric tons last year. This year, procurement, from both domestic growers and importers, is expected to rise to 25 million metric tons, according to Manoj Pandey, a senior government official. "It's not a question of low production or low procurement," says Pandey.

What has changed is that, because of economic reform, the government has gradually eased its control over the rice trade during the past 15 years. India is now more open to the world — and more exposed to global price fluctuations. Farmers and traders across India are now selling to the highest bidder. That means a lot of Indian rice that was once sold domestically is instead sold abroad for higher prices — which in turn drives up domestic prices. The government, in an effort to keep as much rice as possible at home to quell inflation, has banned exports of nonbasmati rice and adjusted price controls to discourage exports of aromatic basmati rice. "In desperation, the government is trying to isolate the domestic market," says economist B.B. Bhattacharya, vice chancellor at New Delhi's Jawaharlal Nehru University.

The problem is that intervention usually has unintended consequences. In theory, the export ban should ease prices in India because more rice should be available. But because the global price remains a benchmark, Indian rice traders are resistant to selling their stocks for much less than they would get on the international market. That means less rice on the domestic market and higher prices for Indians. As economist Swaminathan S. Anklesaria Aiyar wrote recently in the Times of India, cutting exports is a form of national hoarding: "Governments would like to believe that hoarding by traders is terrible, whereas hoarding by governments promotes the public interest. But the impact on prices is exactly the same. Indeed, when governments start to hoard food out of panic, the panic itself stokes further inflationary fears."

Bottom of the Food Chain
Of course, higher global prices hurt the poor most, and the impact is particularly heavy in countries such as Bangladesh and the Philippines, which are dependent on imported rice to feed their large populations. A November cyclone in Bangladesh ravaged the fall crop, destroying some 800,000 metric tons of rice and forcing the country to import an extra 2.4 million metric tons from India simply to stave off famine. In Vietnam, bad weather and pest outbreaks hurt harvests. In the Philippines, where some 68 million people live on less than $2 a day, the government recently urged restaurants to halve their portions of rice. Credit Suisse estimates a shortage could cost the Philippines up to 1% of GDP in 2008. Manila resident Evelyn Belo, who waited in line for an hour last week to get a 110-lb. (50 kg) bag to feed her family of five, is feeling the pain. "It's very hard to feed my family already, and now we're worried that the rice will run out. I've started cooking rice porridge to try and use less. Rice is very important to us: it is what we eat. Without [it] people will die." Food aid programs are suffering, too. Valerie Guarnieri, Philippines director for the U.N. World Food Program, which feeds about 1.1 million Filipinos, says rising prices mean her organization will have to spend about 60% of its $19 million budget on food, up from 45% last year. "It's going to have a huge impact on our operation," Guarnieri says.

Asia's rice crisis isn't likely to ease soon, and may get worse due to ominous long-term trends. The Rice Institute's Zeigler says rice production is not keeping pace with demand from surging Asian populations. The U.S. Department of Agriculture estimates that worldwide rice consumption increased 0.9% last year, to nearly 424 million metric tons. Production increased less than 0.7%. "This has been coming on for several years now," Zeigler says, noting that global stocks are at their lowest point in decades. "We're consuming more than we've been producing. And as demand for rice continues to increase, we've seen productivity growth plateauing."

Zeigler blames a lack of investment in agriculture. In much of Asia, rice farming remains small-scale and inefficient. In Thailand, for example, average yields are less than half that of either Chinese or U.S. farms. At the same time, Asia's rapid urbanization has gobbled up fecund farmland. In Vietnam's Bac Ninh province, 12 miles (19 km) from downtown Hanoi, shimmering emerald paddy fields are now bisected by a four-lane highway. Not far from where rice farmer Nguyen Thi Lan stands weeding her fields in calf-deep muck, a Singapore-Vietnamese joint venture will soon build a 1,700-acre (700 hectare) industrial park and township, turning this rural area into a satellite city. Trang Hieu Dung, director of planning at Vietnam's Ministry of Agriculture and Rural Development, says that the country is losing about 99,000 acres (40,000 hectares) of rice paddies every year to construction of cities, highways and industrial zones. In Thailand, the amount of land under cultivation dropped by more than 13% between 1995 and 2005.

The Race for Rice
Some governments are not taking a long-term view, however. In a game of beggar-thy-neighbor, they're trying to keep inflation at home from soaring out of control. Vietnam recently imposed export quotas to maintain domestic supplies, which reduces the international inventory and drives up the global price. China has also imposed strict limits on exports to restrain domestic prices. In the Philippines, meanwhile, President Gloria Macapagal Arroyo personally negotiated a guarantee of 1.5 million metric tons of rice from Vietnam.

But even if Asia manages to keep its own rice bowl full, high prices and shortages may still filter down to the world's poorest countries. To put the problem in perspective, the Philippines, which faces the most acute rice shortage in Asia, imports just 15% of its rice; many countries in sub-Saharan Africa import up to 40%. Tight world supplies create a zero-sum calculus: Vietnamese rice going to the Philippines is rice that is unavailable for Africa — or for the NGOs that feed the world's most vulnerable populations. "A lot of people don't realize that Africa's rice depends on Asia's surpluses," says the Rice Institute's Zeigler. In other words, Asia's grain is Africa's loss. With Asian nations scrambling to protect their own supplies, that could mean a much hungrier world.

• Peter Ritter