Global Food Crisis Hits Home As Retailers Begin To Ration Rice

rice.JPGAs an unexpected consequence of rising commodity prices and the international food crisis, two American retail giants — Costco and Sam’s Club (a subsidiary of Wal-Mart) — have set quantity restrictions on purchases of bulk rice. Sam’s Club, who is now limiting purchases to four, 20 pound bags of rice per visit, claims that “it is a precautionary measure, aimed primarily at our business customers, making sure we have enough for everyone.” They say it is simply a reaction to “recent supply and demand trends.”

A spokesman from Costco tells a similar story:

We don’t want to create a panic where we don’t think there is a panic, if we weren’t able to get any more rice or any more flour that would be a different story but we’re able to continue to replenish our supplies.

So if there’s no panic, and no shortage in supply, then why are these mega-chains limiting rice? Most likely because the restaurant industry, whose profits have tumbled dramatically in the last twelve months, is looking for new ways to cut costs and save on expenses — particularly in light of the painful new fuel surcharges added on by their suppliers for warehouse-to-store truck trips.

Restaurant owners are therefore doing things like cutting back on sauces and portions, charging for extra condiments, and changing their food suppliers — instead of buying staples from delivery services, they are schlepping to the wholesale stores themselves. Sam’s Club and Costco provide another alternative, as both are known to cater to “small businesses including independent restaurants, nursing homes and day care centers.”

The USA Rice Federation seems to agree:

It’s possible that small restaurants and bodega-type neighborhood stores may be purchasing rice in larger quantities than they do typically to avoid higher prices.

Soaring inflation, poor harvests, and worldwide food shortages are causing other countries, such as Vietnam and India, to place temporary bans on some rice exports. American rice farmers appear to be taking advantage, holding back inventories in hopes of locking in bigger profits as worries about shortages continue to drive future prices. The U.S. accounts for only about 1.5% to 2% of global rice production, but it is the world’s fourth-largest exporter, behind Thailand, Vietnam and India. U.S. rice exports are forecast to increase 20% this year.