Friday, April 04, 2008

Rise of the Hoards

Are we hoarding rice when we buy more than the usual quantity from the supermarket or provision shop? Some may be doing so, fearing that we would run out of rice because our usual suppliers from Thailand and Vietnam, amongst others, are imposing export restrictions on their rice stocks. So it is not irrational for people to buy more rice than usual in anticipation of the possibility, however remote that the government would have us believe, that we might run out of rice. Yes, some are just blindly following what others are doing, buying up rice by the sacks for reasons beyond them, not unlike buying 4-D. But I think the greater reason why people are stocking up on rice is not because they fear shortages. I think people are being economically rational when they buy rice today because there is a likelihood that tomorrow, the price of rice will rise further.

So I am not ashamed to say that last week, I walked into a supermarket and bought up 10 kg of rice (two bags of 5 kg) for my small family of 3. Did I think that there would not be any rice to buy soon? No. Did I anticipate that the price of rice for the same quantity may rise tomorrow? You bet. Am I being rational? Cannot be more. Am I hoarding? Never felt a need to, actually. Potatoes are just as good. So while the government can reassure people about the continued supply of this basic food commodity, it cannot and will not (since it does not believe in subsidizing these things) guarantee that prices will not rise tomorrow. So at the end of the day, the government is actually barking up the wrong tree. Woof woof.

On another note, that there is a stockpile of three months' supply of rice - I am not reassured. Three months seems awfully short on a necessity. That's barely enough time for me to sell the house, serve my notice period, say my goodbyes, buy the plane tickets, put in all the paperwork to migrate, and find a house over there, wherever I am going to migrate to. That's what you do when we've got nothing to eat right? I mean, I don't have a backyard to plant potatoes, sweet or otherwise, to keep the family fed, right? 

But seriously, I understand why it may not be practical to put in a bigger buffer as rice, if kept too long will attract weevils, which will destroy it. Is 3 months an optimal buffer stock? I don't know. Will it cost suppliers a lot of money to maintain these stock? Definitely! When you have money tied up in stock, it is always a losing proposition. But at least the government is bearing the cost of storing the rice.

So people will still continue to stock up, not because they think we will run out of rice, but because of the fear of inflation. Simple as that.

Image source: Author: Daniel Bayona

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