Rice prices jumped 30 per cent to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5bn people.

The increase came after Egypt, a leading exporter, imposed a formal ban on selling rice abroad to keep local prices down, and the Philippines announced plans for a major purchase of the grain in the international market to boost supplies. Global rice stocks are at their lowest since 1976.

On Friday the Indian government imposed further restrictions on the exports of rice to combat rising local inflation, with traders warning that the new regime would de facto stop all India’s non-basmati rice sales.

The measures include raising the minimum price for selling abroad non-basmati rice by 53 per cent to $1,000 a tonne. Exports of premium basmati rice are likely to continue, although volumes could also suffer as the government also increased the minimum export price and scrapped export tax incentives.

While prices of wheat, corn and other agricultural commodities have surged since late 2006, the increase in rice prices only started in January.

The Egyptian export ban formalises a previously poorly enforced curb and follows similar restrictions imposed by Vietnam and India, the world’s second- and third-largest exporters. Cambodia, a small seller, also on Thursday announced an export ban.

These foreign sales restrictions have removed about a third of the rice traded in the international market.

Some 70 percent of all households in Viet Nam grow rice, but 60 percent are net buyers of rice. Among the poor 53 percent are net buyers. Thus, about half the poor benefit from the cheap rice price policy implied by the imposition of the rice export
quotas that were in place in the early 1990s. Rural farm households who are net sellers are penalized by these policies. Eighty-four percent of rural households grow rice and 43 percent market some surplus. More poor households sell rice than do producers from rich households, but the differences are small (Table 2). However, the more affluent sell a much larger proportion of their production. Those in the Mekong River Delta stand to gain proportionately more from increased rice prices than do those from other regions, as measured by the Net Benefit Ratio (Table 3).1 In general, both the urban poor and rich lose from an increase in rice prices, the former proportionately much more than the latter.

Similarly the rural poor gain proportionately less from increased rice prices than the rich. The poorest in urban areas represent only 1 percent of the households or 3 percent of the population.

Prior to the study the government felt that the food insecure were net buyers. The results indicated that many of the poor were rice farmers who were adversely affected by rice quotas that lowered rice prices. “In general, the 'cheap rice' policy is more effective in transferring benefits from the rural areas to the urban areas and from the surplus regions to the deficit regions than it is in assisting the food insecure poor” (IFPRI 1996, 400).

Using a panel of Vietnamese households, we find that reductions in child labor are increasing with rice prices. Declines in child labor are largest for girls of secondary school age, and we find a corresponding increase in school attendance for this group. Overall, rice price increases can account for almost half of the decline in child labor that occurs in Vietnam in the 1990s. Greater market integration, at least in this case, appears to be associated with less child labor. Our results suggest that the use of trade sanctions on exports from developing countries to eradicate child labor is unlikely to yield the desired outcome.