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Sam's Club, Costco Curbing Rice Sales

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Sam's Club, Costco Curbing Rice Sales

Business

Sam's Club, Costco Curbing Rice Sales

Sam's Club, Costco Curbing Rice Sales

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Wal-Mart Stores Inc.'s Sam's Club and Costco divisions are placing limits on the amount of rice that customers can buy. Company officials say demand for rice has shot up sharply in the wake of concerns about global food shortages.

MELISSA BLOCK, host:

ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block. Today, the rice shortage around the world has hit the US in one super-sized way. Sam's Club, the discounter owned by Wal-Mart, announced it will limit its customers to four bags of certain kinds of rice. The discount competitor Costco says it's considering a similar move. This announcement follows food rationing, even food riots around the world, as prices for staples such as rice and wheat keep going up. NPR's Adam Davidson explains what's behind the Sam's Club decision.

ADAM DAVIDSON: First off, don't panic.

Mr. GREG MASSA (Rice Producers of California): There is plenty of rice in the United States to feed the 300 million Americans.

DAVIDSON: That's Greg Massa with Rice Producers of California. He says, yes, there is a global rice shortage. But there isn't any shortage in the US. We have a huge surplus. US farmers grow twice as much rice as Americans eat and export the rest.

Mr. MASSA: There is rice to be had, but you have to pay for it.

DAVIDSON: Global rice prices are at all-time highs. Today, the wholesales futures price hit almost $.25 a pound. That's a record. These high prices are unaffordable for the poorest people in the world, but Americans, even poor Americans, can definitely pay a quarter or retail $.50 for a pound of rice. It's about the cheapest food you can buy. So Americans have access to plenty of rice. They just have to pay a few pennies a pound more. Why in the world would Sam's Club and possibly Costco ration rice? Why don't they just raise their prices and buy more? They could make a tidy profit.

Mr. JOHN MARRIN(ph) (Jefferies Investment Bank): They're not looking to make money off the merchandise. It's primarily off of membership income.

DAVIDSON: John Marrin monitors these retailers for Jefferies, an investment bank. He says Sam's Club and Costco are not like a supermarket. At a supermarket, when the supply of rice goes down and demand goes up, they just raise prices, make some more money. Sam's Club and Costco make most of their profits off of those membership fees you pay just for the right to shop their. They make next to nothing on the individual purchases. So they could raise prices, get more rice supply, avoid the rationing, but that would make their members mad. The other option: Tell the world you are rationing rice rather than raising prices.

Mr. MARRIN: You know, it's an opportunity to drive the point home that they're going to be very competitive on price.

DAVIDSON: Maybe some people will even join up, pay those membership fees. Adam Davidson, NPR News.

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