Wal-Mart's Sam's Club Restricts Purchase of Some Rice

Wal-Mart's Sam's Club Restricts Purchase of Some Rice

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Wal-Mart Stores Inc.'s Sam's Club warehouse unit is restricting purchases of some types of rice to four bags a visit as prices reached a record in Chicago futures trading.

 

The limits on jasmine, basmati and long-grain white rice, a response to ``recent supply and demand trends,'' will be put into effect in all U.S. stores where allowed by law and are effective immediately, Sam's Club spokeswoman Kristy Reed said today in an e-mailed statement.

 

Some consumers have started hoarding rice, the food staple for half the world as prices soar and supplies shrink. China, Vietnam, India and Egypt have curbed sales abroad to safeguard domestic supplies and cool inflation. Thailand also may restrict shipments, a World Bank official said today.

 

``The warehouse clubs are doing it to protect their business customers, like smaller restaurants, caterers, nursing homes, day-care centers,'' said food consultant Jim Degen. ``The business members are the most important members in warehouse clubs because they generate so much more revenue per member.'' Degen is a principal of J.M. Degen & Co., a food industry marketing consulting firm based in Templeton, California.

Some of Costco Wholesale Corp.'s stores, including locations in California, have put limits on sales of rice and flour, Chief Executive Officer James Sinegal told Reuters yesterday. Sinegal didn't return a phone call from Bloomberg News seeking comment.

 

Distribution Systems

Costco and Sam's Club have extensive distribution systems and source worldwide, so they can redistribute their rice supplies within the United States, meaning limits on customers may not be a long-term problem, said Degen.

 

``We are working with our suppliers to address this matter to ensure we are in stock,'' Sam's Club's Reed said. The stores aren't limiting purchases of flour or oil, she said. Reached via phone, she declined to comment further.

 

Rice has more than doubled in the past year. Rice futures for July delivery rose 2.6 percent in Chicago today, touching a record $24.85 per 100 pounds, and have climbed 26 percent this month.

Wheat, corn and soybeans gained to records this year, spurring social unrest in Haiti and Egypt.

 

Wal-Mart, the world's largest retailer, rose 37 cents to $56.92 at 4:15 p.m. in New York Stock Exchange composite trading. Costco, the largest U.S. warehouse club, climbed $1.52, or 2.2 percent, to $69.60.

 

Food Prices

The higher commodities prices are also pushing up U.S. food prices and spurring inflation. The consumer price index climbed 0.3 percent in March, after no change in the prior month, the Labor Department said April 16. Inflation, combined with falling home values and mounting job losses, is leading to cutbacks in consumer spending that may push the economy into a recession.

 

Limits on rice purchases will be felt the most in California and Texas, which have large Asian and Mexican populations, whose diets include rice, Degen said.

 

Soaring prices may put basic foods beyond the reach of the poorest people, raising the risk of a ``silent famine'' in Asia, a World Food Program official said April 21.

 

In the U.S., half of the domestic rice crop meets 88 percent of the country's demand, said David Coia, a spokesman with the USA Rice Federation in Arlington, Virginia.

 

`Uncalled-For Hysteria'

``When global prices rise as quickly as they have, as rice has, and as recently happened with wheat, you are going to have some concerns, and hysteria in some cases that is uncalled for,'' Ephraim Leibtag, an economist with the U.S. Department of Agriculture in Washington, said in a telephone interview. ``Food supplies have been pretty stable in the U.S. over the last 20 to 30 years.''

 

When prices rise rapidly, consumers buy larger quantities to lock in the lower prices, and that effect is exacerbated when a product is storable, he said.

 

The Bureau of Labor Statistics index of consumer prices for rice, pasta and cornmeal rose 12.1 percent in March over a year earlier. In March 2007, the index was up 5.2 percent.

 

``There is no shortage of rice in the United States, and my understanding is that you have these companies like Sam's Club and Costco that want to have rice for all their customers, not just the large purchasers who hoard,'' Coia said by telephone.

 

The worldwide supply shortfall will begin to ease with the June harvest, and may be resolved by the end of 2009, as farmers increase their crops to meet the demand, he said.

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