In his recent column, Lam lamented the lack of response (? or is it the speed of response) of rice production to the surge in its price. That fact persuaded him to abandon his free market belief as he inferred from that fact that the market in rice failed miserably...
The fact of the matter is, hemmmm, it is not market failure, but state failure which accounted for the lack of (?) supply response to the price surge in rice.
My former teacher wrote in the New York Times:
RISING food prices mean hunger for millions and also political unrest, as has already been seen in Haiti, Egypt and Ivory Coast. Yes, more expensive energy and bad weather are partly at fault, but the real question is why adjustment hasn’t been easier. A big problem is that the world doesn’t have enough trade in foodstuffs.
The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. (My emphasis) Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity.
So when the price goes up — indeed, many varieties of rice have roughly doubled in price since 2007 — this highly segmented market means that the trade in rice doesn’t flow to the places of highest demand.
Poor rice yields are not the major problem. The United Nations Food and Agriculture Organization estimates that global rice production increased by 1 percent last year and says that it is expected to increase 1.8 percent this year. That’s not impressive, but it shouldn’t cause starvation.
Read the whole thing here.