That nation’s largest retailers including Costco (COST), Sam’s Club and Wal-Mart (WMT) are beginning to limit the sale of white rice this week because of supply problems.

According to experts, the global rice supplies will never return to a comfortable level due to strong global demand and limit to the production growth. Global 2007-08 rice production is forecast at a record 423 million tons, however demand is projected at a record 424 million tons.

The average American eats just 20 lbs. of rice a year, but the average Asian American eats a massive 150 lbs. a year.

One of the reasons why Costco and Wal-Mart are limiting the sale of rice is because the rising price of rice has prompted consumers to stock up now while they can.

The major reason though, is Australia. The Deniliquin mill, the largest rice mill in the Southern Hemisphere, once processed enough grain to satisfy the daily needs of 20 million people. But six long years of drought have taken a toll, reducing Australia’s rice crop by 98 percent and leading to the mothballing of the mill last December. Ten thousand miles separate the mill’s hushed rows of oversized silos and sheds beige, gray and now empty from the riotous streets of Port-au-Prince, Haiti, but a widening global crisis unites them.

The collapse of Australia’s rice production is one of several factors contributing to a doubling of rice prices in the last three months increases that have led the world’s largest exporters to restrict exports severely, spurred panicked hoarding in Hong Kong and the Philippines, and set off violent protests in countries including Cameroon, Egypt, Ethiopia, Haiti, Indonesia, Italy, Ivory Coast, Mauritania, the Philippines, Thailand, Uzbekistan and Yemen.

And the problem isn’t limited to Rice. Flour, Wheat, Corn, not to mention Oil and Gold are all commodities that have become quite expensive lately.

Unfortunately, there is no easy way to invest in Rice other than directly through the commodities exchanges. If you’re into that, we would recommend going long now and keeping an eye on Australia’s weather conditions. Once the six-year drought ends, price pressure on rice should fall.

However, there is an ETF that is tied to the Commodities Market, the little- known GREENHAVEN CONTINUOUS COMMODITY INDEX FUND (GCC). The Master Fund will hold two types of investments. The first will be long positions in futures contracts on the seventeen commodities in the Index. Since the Index allocates equally among the components and is rebalanced daily, performance risk of the futures contracts is divided equally among the components. Each of the component commodities is traded on a particular exchange, as follows (courtesy of the GCC 10-K):

CME Corp
Corn, wheat, soybeans, hogs, cattle (5/17= 29.4% of positions)

NYMEX
Crude oil, heating oil, natural gas, silver, gold, platinum, copper
(7/17=41.2% of positions)

ICE
Cotton, sugar, coffee, cocoa, orange juice (5/17= 29.4% of positions) Each of these exchanges guarantees the performance of its outstanding futures contracts. Each is also publicly traded and, in management’s opinion, well-capitalized. Each uses a system of margining and daily cash settlement of unrealized gains and losses in open positions, which reduces counterparty risk for market participants. Hence, management does not believe that the Fund faces any credit or counterparty risk in its futures trading and contract positions. The Master Fund will also hold significant cash balances representing the excess of invested funds above the margin requirements for its futures positions. To the extent practical, the Fund will hold this excess cash in short-term obligations of the United States Treasury. Hence, management assigns no counterparty risk to such holdings.

Fellow Stockmasters: The GCC ETF has only been around since December 2007 and has very low volume. In spite of that, if commodity prices as a whole keep moving up like they have been, you’re going to want to take a look at this ETF for some exposure to the commodity markets.

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