Thursday, April 24, 2008

Food & Society Global Food Crisis Special Feature: Wal-Mart's Sam's Club USA Limiting Rice Purchases; Costco Doing Same on More Limited Store Basis

Natural~Specialty Foods Memo Editor's Note: The Sam's Club Warehouse division of Wal-mart, Inc., the worlds largest corporation and retailer, has announced it's limiting the amount of certain types of rice that's it's customers--which include small businesses as well as consumers--can buy per-shopping trip at all of its U.S. club stores.

Additionally, competitor Costco Wholesale also is limiting customer purchases of certain rice varieties on a limited, store-by-store basis in the U.S.

Below is a report (Thursday, April 24, 2008) by the Reuters' News Agency's New York Bureau:

NEW YORK (Reuters) — Wal-Mart Stores' (WMT) Sam's Club warehouse division said Wednesday that it is limiting sales of Jasmine, Basmati and long grain white rices "due to recent supply and demand trends."

The news came as rice prices surged, with U.S. rice futures hitting an all-time high Wednesday on worries about supply shortages. Rice for the most actively traded July contracted jumped 62 cents to $24.820 per 100 pounds on the Chicago Board of Trade, after earlier rising to a record $24.85.

Relentless demand from developing countries and poor crop yields have pushed rice prices up 70% so far this year, raising concerns of severe shortages of the staple food consumed by almost half the world's population.

On Tuesday, Costco Wholesale (COST), the largest U.S. warehouse club operator, said it has seen increased demand for items like rice and flour as customers, worried about global food shortages and rising prices, stock up.

Tim Johnson, president-CEO of California Rice Commission, which represents growers and millers of rice in the state, said Tuesday: "Bottom line, there is no rice shortage in the United States. We have supplies."

Sam's Club, the No. 2 U.S. warehouse club operator, said it is limiting sales of the rices to four bags per customer per visit, and it is working with its suppliers to ensure the products remain in stock.

The broader chain of Wal-Mart stores has no plans to limit food purchases, however.
Warehouse clubs cater to individual shoppers as well as small businesses and restaurant owners looking to buy less expensive, bulk goods.

With prices for basic food items surging, customers have been going to the clubs to try to save money on bulk sizes of things like pasta, cooking oil and rice.

Sam's Club said is not limiting sales of flour or cooking oil at this time. Costco said some of its stores have put limits on sales of items such as rice and flour, but it is trying to modify those restrictions to meet customer demand.

Costco Chief Executive James Sinegal told Reuters that he believes the recent surge in demand was being driven by media reports about rising global demand and shortages of basic food items in some countries.

Food costs have soared worldwide, spurred by increased demand in emerging markets like China and India; competition with biofuels; high oil prices and market speculation.

The steep increases have followed similar jumps in the price of wheat, corn and soybeans that have added to Americans' growing grocery bill and led to violent food riots in poor countries including Haiti, Senegal and Pakistan.

Most of the rice eaten in the world is consumed within 60 miles of where it was grown, said Nathan Childs, an economist and rice expert with the U.S. Department of Agriculture. Traditionally very little of it was traded in the world market.

As populations crossed borders, the taste for specialty rices such as the Indian basmati, or Thai jasmine rice, which grow only in their areas of origin, spread.

U.S. production of long grain and medium grain rice is strong, and the global crop is larger than ever, Childs said. But with some of the principal exporters of the higher-priced rices, such as India and Vietnam, shunning foreign sales to control prices at home and the cost of food generally going up, the price of rice has been climbing to new heights.

What adds to the price spike — and the run on specialty products like basmati — is that rice consumers tend to be very loyal. The market is highly segmented by type of rice and quality, and buyers will generally not take a substitute, Childs said.

"California's had a pretty good crop, but basmati and jasmine consumers have a history of not switching," he said. "They could always have bought cheaper Calrose. But they don't."

Rice prices have risen 68% since the start of 2008.

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