H1 WA2 (Full Answer with Examiners' Report)

Ques%on: Recent developments in the market for rice Extract 1: Rice prices surge to fresh 15-year high Rice prices have surged to a fresh 15-year high, fuelled by strong demand and lingering supply concerns. Thai white rice climbed for a third straight week to reach US$659 a tonne on Dec 27, according to the Thai Rice Exporters AssociaJon. That is the highest since October 2008 and brings the increase in prices to about 38 per cent in 2023, aOer top shipper India restricted exports and dry weather threatened producJon. Rice is vital to the diets of billions of people in Asia and Africa, and the latest run-up in prices could fan inflaJonary pressures and hike import bills for buyers. Some naJons have been ramping up purchases to build sufficient stockpiles amid fears that the impact of El Nino will further Jghten supplies in the coming months. Source: straits-mes.com, 27 December 2023 Figure 1: Price indices of rice and wheat from 2020 to 2023 Source: asia.nikkei.com, 31 December 2023 Extract 2: Rice export bans and price caps are a food crisis risk for Asia The demand and supply diagram is a diagram that Economics students learn by heart. It puts together supply, demand and prices in a single diagram. The graph is the stuff that makes markets Jck, whether for iPhones or bowls of rice. As an associate professor at the School of Economics at the University of the Philippines, prior to her move into government, Cielo Magno imprinted the supply-and-demand graph on her students’ minds. Typically, supply slopes upward: When prices rise, suppliers are willing to produce more; demand generally slopes downward: At higher prices, consumers buy less. Then Magno became her country’s finance undersecretary, building a reputaJon for speaking her mind. On Sep 1, she posted a common version of the diagram on social media: “I miss teaching …,” she added. Soon aOer, she was fired. Though Magno didn’t explicitly say it then,

through her post, she was quesJoning the government’s decision to introduce a price cap for rice. If the supply-demand diagram is Economics 101, then price caps are Government 101, distorJng how markets are supposed to work. And rice is right now the target of many. Sadly, Magno’s travails in the Philippines aren’t an excepJon. Across Asia, naJons are trying to bend supply and demand curves, abempJng to control the cereal grain’s prices. Carelessly, they are sowing the seeds of a potenJal food crisis. Source: channelnewsasia.com, 19 September 2023 Extract 3: As El Nino bites, Indonesians struggle with record-high rice prices Rising rice prices and reduced availability can lead to food insecurity, parJcularly for low-income households. This can create feelings of hunger, anxiety, and frustraJon, increasing the risk of social unrest and protests. Acknowledging the pressures from rising rice prices to consumers and the more than 15 million households that grow food, President Joko Widodo last year draOed in the military to help