India Raises Rice Export Price to Cool Food Inflation

March 28 (Bloomberg) -- India, the world's second-biggest rice producer, increased the minimum export price for the grain to boost local supplies and curb inflation as global stockpiles of cereals fall to the lowest in more than two decades.

Exporters must ship rice for at least 40,000 rupees, or $1,000 a ton, excluding freight, which compares with $650 a ton previously, the trade ministry said in a statement. The price for aromatic Basmati rice was raised to $1,100 a ton.

Record prices are threatening food security in rice-buying nations from the Philippines to Nigeria, and are driving up costs for producers including Anheuser-Busch Cos., the biggest U.S. buyer of the grain, and cereal maker Kellogg Co. Vietnam, China and Egypt are restricting rice exports, and South Korea will release grain from state-controlled reserves to cool prices.

''Not just India but governments across the globe are taking steps to keep prices of staple foods under control,'' said Atul Chaturvedi, president of Adani Enterprises Ltd., India's biggest private exporter of farm goods. ''It's clearly the result of the fight for food and fuel.''

The Food and Agriculture Organization said in February that 36 nations including China face food emergencies this year. World rice stockpiles may total 72.1 million metric tons by end of July, the lowest since 1984, the U.S. Department of Agriculture said.

Rough rice prices have almost doubled on the Chicago Board of Trade in the past year. Rice for delivery in May rose as much as 48 cents, or 2.5 percent, to a record $19.785 per 100 pounds in Chicago today. Wheat reached $13.495 a bushel on Feb. 27, its highest-ever.

'Social Unrest'

''Food prices all over the world are going through the roof and so spread the risk of social unrest,'' investor Jim Rogers said in Singapore today. ''It doesn't matter where, everybody has to pay higher prices for food and that's causing a problem.''

Consumer prices in China, the world's fastest-growing major economy, soared to 8.7 percent in February, the fastest pace in 11 years. In Thailand, prices jumped the most in 20 months, and in Vietnam, inflation is its highest in more than a decade.

Rising prices and shortages of food staples have been felt outside Asia. In Argentina, farmers blocked highways and access to ports and warehouses to protest rising export taxes, leading to a shortage of meat. The nation is the world's second-largest corn exporter and the third-largest soybean supplier.

The Philippines, the world's biggest rice buyer, may reduce the import tax on the grain to as little as 10 percent from 50 percent, Finance Secretary Gary Teves said in an interview today. Sri Lanka scraped customs duty on rice imports, the state-owned Daily News reported today.

Vegetable Oils Tax

India cut the import tax on vegetable oils last week, the fifth reduction since January 2007, and banned exports of all cooking fats for a year, to rein in inflation that's at a 13- month high. Prime Minister Manmohan Singh's government has curbed exports of wheat and lentils, and banned futures trading in some commodities to cool prices before elections in May 2009.

The South Asian nation banned shipments of rice in October, before raising the benchmark price to $650 a ton on March 7 as demand for the grain for welfare programs doubled in the past five years. Exports totaled 3.6 million tons in the year ended March 31, 2007, little changed from 2006.

Investment Funds

Prices of agricultural commodities are being driven by investors looking for alternatives as the dollar and stocks drop.

''Funds have driven up prices to abnormal levels,'' Adani's Chaturvedi said. ''There's a mismatch in supply and demand but not to the extent that warrants current abnormal levels.''

Global investments in commodities rose almost 33 percent to $175 billion last year, according to Barclays Capital. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials climbed to a record on Feb. 29 and is up 16 percent this year.