Credit crunch may lead to another rice crisis

PHILIPPINES: A drop in oil and fertilizer costs has halved the price of rice - a staple for almost 700 million of Asia's poorest - but it could jump again this year as farmers struggle to secure loans amid the credit crunch, experts said Friday.

The price of the regional benchmark, Thai 100 percent Grade B rice, fell to $575 per ton last October from a record high $1,080 per ton in April - a result of record production and declining oil and fertilizer costs.

Farmers, however, suffered losses because they were left with a lower-priced crop produced with high-priced fuel and fertilizer, said the Philippines-based International Rice Research Institute.

The ongoing credit crisis makes it hard to secure loans for purchasing seeds and fertilizer, and farmers may plant less or switch to less expensive staples, Samarendu Mohanty, head of social sciences at the rice institute, wrote in a quarterly report.

"Production uncertainty due to tight credit and declining rice prices combined with strong demand growth points to another rise in rice prices in the coming months," he said. "Price volatility will remain high."

MANILA, Friday, AP