Concern over rising rice prices

The price of rice could rise sharply, causing another shortage of the staple grain. Last year the price hit levels not seen in decades, which led to shortages - and riots - in many countries. There are concerns this year's harvest may not live up to expectations because of poor weather and a lack of the credit that farmers need to buy fertiliser. The Thai Rice Exporters Association has increased the price of its benchmark white rice by 3% in the past week to $608 a tonne. It is the fourth consecutive week of increases. A year ago rice cost $370 a tonne but shot up to nearly $1,000 in mid-May 2009.

This is a good example to try out your market analysis and think about why it hasn't been possible to use buffer stocks to stabilise price. Think about the effects of the rise in price - winners and losers?

Link to BBC News

The return of coal?

The Observer reported that Britain is poised to expand its coal mining industry, despite fears that the move will lead to a rise in climate change emissions and harm communities and the environment. In the past 18 months 14 companies have applied to dig nearly 60 million tonnes of coal from 58 new or enlarged opencast mines. At least six coal-fired power stations are planned. If all the applications are approved, the fastest expansion of UK coal mining in 40 years could see southern Scotland and Northumberland become two of the most heavily mined regions in Europe.
The demand for new mines is being driven by dramatic increases in the price of coal. This has quadrupled in two years and has risen by 45 per cent since the start of this year. Opencast, or surface, mines are much cheaper than deep mines, but those living nearby can suffer years of pollution. (Link)

How do firms set prices?

For economics students, obsessed with demand and supply diagrams, setting prices is child's play. But how do firms set their prices? What information do thay need to set a price that will hopefully clear the market. An interesting article in the FT, offering advice to firms about what to consider when setting prices in an economic slowdown. A key factor is to 'understand how price-sensitive customers will behave - and act on that knowledge more quickly than competitors'. Price sensitivity, a concept that should be familiar to students. Read the FT article here.