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Views from the Center


This posting is joint with Vijaya Ramachandran

Today, President Bush called on Congress to provide another $770 million in food aid, in addition to the $200 million already allocated through the Department of Agriculture,in order "to keep our existing food aid programs robust."

There is no doubt that these additional funds are much needed to purchase and distribute food to those who are suffering greatly from the current spike in food prices. But the U.S. can and should do more. Specifically, the U.S. must allow Japan to sell, at full cost on Japanese books, the 1.5
million metric tons of rice that it has in storage. About 600,000 tons is
Thai and Vietnamese long-grain rice (high quality) and the rest is US medium
grain (good rice). All of the rice is in Japanese warehouses because of an
agreement with the World Trade Organization, and the U.S. as "cognizant
observer" of the rice agreement, would need to approve the sale of both
US and the Thai/Vietnamese rice. Japan currently cannot release this rice
to the World Food Program (or to the world market) without permission from
the U.S., and the Bush administration is yet to move on this.

If Japan is able to release this stockpile of rice, world rice prices would
likely come down to $600 per ton within a week. The speculative bubble will
be pricked, and hoarding will stop. Exporters will start selling again, and
we will likely return to what will be "normal" rice prices going
forward-about $600 per ton. This is of course much higher than two years
ago, but a far cry from the $1200-1500 per ton we are likely to see if the
Philippines and other countries continue to buy aggressively in world

We commend President Bush for his efforts to increase funding for emergency
food aid but remind him that much more can and should be done to address the
current dire situation.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.