Seeds of a Panic

The way some people are talking, there will soon be food rationing in the United States, the breadbasket for the world.

News of price spikes and food riots abroad have some worrying that it could happen here. Images of a free-market version of Soviet bread lines have been evoked.

Costco stores in California have placed a limit on the quantities of flour one shopper can buy at a time. Wal-Mart Stores' warehouse chain, Sam's Club, is limiting sales of 20-pound bags of rise to four bags per customer.

News coverage of such restrictions seems to be fanning shoppers' fears. The New York Sun on Monday described the trials and tribulations of shoppers across the nation trying to buy large quantities of rice.

"Shortage Prompts Costco California Rice Rationing," reads a headline on the website of a CBS affiliate, accompanied by a video account of apparently depleted grain supplies in Bay Area stores.

Costco's chief executive,James Sinegal, explained the limits in an interview with Reuters, saying "If a customer wants 10 pallets of flour, we'd probably say 'No, we can't give you that. We can give you one pallet," Reuters quotes Sinegal as saying.

The question is not why Costco would place a limit on flour, it's why anyone in their right mind would be buying in that quantity: while a "pallet" is not technically a unit of measure, it refers to one of those 40 x 48 inch bags you see stacked on fork lifts. That's a lot of flour.

Or try putting 80 pounds of rice in your trunk.

But American consumers have no reason to be hording stores of rice and flour in preparation for some kind of agricultural apocalypse.

"Rice supply and demand a cyclical thing," says David Coia, a spokesman for the USA Rice Federation. "Supply will catch up with demand very shortly."

The vast majority of rice and wheat consumed in the United States is produced here as well, with enough crop left over for about half of it to be exported.

True, rice futures prices have more than doubled since September and wheat prices started soaring at the beginning of 2007.

But skyrocketing commodity prices are is not in and of itself proof that there are shortages. The futures markets are flooded with speculative cash tossing those simple supply and demand relationships out of whack.

Bottom line? Stick with one 20-pound bag of rice. You should be good for a year.

Liz Gunnison

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