While rice piles on plates for millions around the world everyday, prices for the food staple in the United States have skyrocketed in the past year, hitting an all-time high about two weeks ago and causing concern for some Ann Arbor eateries.
Rice that traded for $10.66 per 100 pounds in May 2007 was trading for record-breaking $25.07 on the floor of the Chicago Board of Trade as of April 24th. Though the price has declined slightly since then, closing at $22.35 per 100 pounds on Thursday, the recent price shock has led wholesalers like Sam’s Club to take drastic measures.
In response to record pricing, Sam’s Club announced that it would limit customers to four 20-pound bags of rice per visit. For the average American, who consumes about 24 pounds of rice every year, according to the USA Rice Federation, the 80-pound limit shouldn’t pose a problem.
But the new limits have left Pushpinder Sethi, owner of the Earthen Jar restaurant in Ann Arbor, looking for other places to find the nearly 40 pounds of Basmati rice that his restaurant cooks up every week. The Earthen Jar serves mostly Indian cuisine, and Sethi said he used to go to places like Sam’s Club to stock up on rice. Recently, though, he’s had to turn to local shops because larger wholesalers don’t have what he needs.
Sethi also said the switch has meant paying prices that are two to three times higher than those from a year ago.
“Sam’s Club used to have a 20-pound bag that was $10,” Sethi said. “Now I’m paying $20 to $25 for the same 20-pound bag.”
Despite the financial hit his family-owned business has taken in the past year, Sethi said he was afraid higher prices could drive away potential customers in the midst of a struggling state economy. He said he’ll keep the prices steady for now, in the hope they go back down in a couple of months.
“I’ll eventually have to increase the prices because everyone around me is raising their prices,” he said.
Though state-level conditions seem to direct local business owners like Sethi, University Economics Prof. Alan Deardorff said a growing world economy is really what’s behind increasing rice prices.
Increasing incomes in developing nations mean that the world is consuming more food than ever before, he said. It also means that citizens of those nations can now afford to buy food that they previously couldn’t.
“What’s particularly the problem with this is not that that people are eating so much more rice,” Deardorff said. “But people in previously poor countries are now affording to eat more meat, which uses far more grain than it does if we eat it directly.”
Deardorff said demand for commodities like rice and corn have outpaced supply in recent years and that this permanent shift in the world market means higher prices are probably here to stay.
Eric Kung, owner of Ann Arbor Chinese restaurant Emerald City, said the increase in rice prices over the past year have made him rethink the way he runs his restaurant.
Serving over 600 pounds of rice every week, Kung said his restaurant used to give customers long-grain white rice with their meals at no extra charge.
But now that his rice supplier, food distribution giant Sysco Corporation, has raised prices and tacked on a $7 fuel charge for delivery, Kung said he’s not sure if the complementary side dish will still be free.
“We’re afraid to raise the price, but we don’t really have a choice right now,” Kung said. “It’s already a low profit margin, and when the prices increase, there’s no profit left at all.”
Though he said rice prices have hurt his business, Kung said he felt lucky just to be open. He added that many of his neighboring competitors have closed their doors in the past year.
Sysco also supplies rice to University dining halls, but Kathy Whiteside, who is the housing menu systems manager, said higher prices haven’t changed the way the University does business.
“We meet with the vendors weekly and they keep us informed on the market trends,” Whiteside said. “So we started talking about rice probably about six weeks ago.”
Though she said the University doesn’t have immediate plans to scale back on the more than 21,000 pounds of rice served in the dining halls every year, Whiteside said that if the prices don’t go down in the future, the University would “take a look at the total menu mix and then make some changes.”