The Rice Bubble of 2008

Facing a parliamentary election in May, 2009, the Indian government was stimulated to action by the wheat commodity market trying to force it to import additional wheat. To maintain supplies for the public food distribution scheme, the government curtailed rice exports. These export restrictions spread to other
suppliers and lead to urgent efforts by rice importing countries to secure supplies—at any price. It is no accident that most of these countries faced elections, and food price inflation is extremely unpopular. 

The crisis was created by the tension between rice as an economic commodity traded on world markets and its role as a political commodity that influences the fate of poor farmers and consumers and, consequently, political regimes. Fortunately, two scientists Tom Slayton and C. Peter Timmer of CDG (Center for Global Development) recognized the panic driven bubble and hurried US Policy makers into counter action to create a sudden surge of unexpected supplies to prick the bubble. It turned out that an agreement by Washington and Tokyo for Japan to release its 1.5 million tons of unwanted rice stocks was the key to piercing this bubble. It didn't even take the release of any real nice into the market, just the agreement brought prices down
immediately, averting hunger, malnutrition, and increased mortality among poor people in Asia.

In early Oct 2011, 400 economists from 40 countries signed a letter to finance chiefs of the world's leading economies seeking curbs on speculative commodities trading.. US Feds adopted limits on speculative trading a week later. It is nice to see action at a global level to avert more suffering an hunger in the world at a time where there is plenty of food on the planet for every human being. Here is the link to the nice paper from the two scientists who acted in time to kill a speculative monster CGD article