Sam's Club, Costco limit rice purchases as prices rise - Apr. 23, 2008
Sam's Club, Costco limit rice purchases as prices rise
The move comes as U.S. rice futures hit a record high amid global food inflation
(AP) -- The two biggest U.S. warehouse retail chains are limiting how much rice customers can buy because of what Sam's Club, a division of Wal-Mart Stores Inc., called on Wednesday "recent supply and demand trends."
The broader chain of Wal-Mart (WMT, Fortune 500) stores has no plans to limit food purchases, however.
The move comes as U.S. rice futures hit a record high amid global food inflation, although one rice expert said the warehouse chains may be reacting less to any shortages than to stockpiling by restaurants and small stores.
Sam's Club followed Seattle-based Costco (COST, Fortune 500) Wholesale Corp., which put limits in at least some stores on bulk rice purchases.
Sam's Club declined to say if this is first time it has restricted sales of bulk foods. The limits affect 20-pound bags, not retail-sized portions. Costco President and CEO Jim Sinegal declined to discuss the issue Wednesday with an AP reporter.
Sam's Club said it will limit customers to four bags at a time of imported jasmine, basmati and long grain white rice.
Higher prices ahead
The warehouse chain caters heavily to small businesses, including restaurants. Sam's Club spokeswoman Kristy Reed said she could not comment on whether the problem was caused by short supplies or by customers stocking up in anticipation of higher prices.
USA Rice Federation spokesman David Coia said there is no rice shortage in the United States.
"It's possible that small restaurants and bodega-type neighborhood stores may be purchasing rice in larger quantities than they do typically to avoid higher prices," Coia said about the warehouse chain restrictions.
A smaller chain, Natick, Mass.-based BJ's Wholesale Club (BJ, Fortune 500), said it is not imposing limits for now.
"At the present time, BJ's Wholesale Club is not limiting the amount of rice purchases made by our members, but, due to the current market situation, that could change at any time," spokeswoman Sharyn Frankel said in a statement.
In New York's Chinatown, shop owners said that they haven't seen people stocking up amid fears of rice shortages.
At Bangkok Center Grocery, one of the main suppliers of Thai food products in New York City, manager Tom Pongsopon said the price of a 25-pound bag of Jasmine rice at his Chinatown store has gone up from $15 to $20 in a matter of months.
"We have enough for now, but I'm not sure about the future," Pongsopon said.
The Sam's Club restriction is effective immediately at all locations where quantity restrictions are allowed by law. It does not apply to other staples such as flour or oil.
"We are working with our suppliers to address this matter to ensure we are in stock, and we are asking for our Members' cooperation and patience," Reed said in a statement.
Sam's Club has 593 stores compared with 2,523 Wal-Mart Supercenters that combine a full grocery section with general merchandise.
Costco has 534 warehouses worldwide, most of them in the United States.
Wal-Mart spokeswoman Deisha Galberth said Wal-Mart stores have no plans for restrictions similar to those at Sam's Club.
"We are not seeing any signs of concern in the supply chain that would cause us to limit the sales of any items," Galberth said.
Investors react
U.S. rice futures soared to an all-time high Wednesday as investors bet that surging world demand will continue to pressure already dwindling stockpiles. Rice for the most actively traded July contract jumped 62 cents to $24.82 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 percent so far this year, raising concerns of severe shortages of the staple food consumed by almost half the world's population.
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.
But 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."
Sam's Club, Costco limit rice purchases as prices rise
