Asian commodity and currency markets could be plunged into chaos after the Malaysian government threatened to abandon standard trading channels in favour of bartering palm oil for rice.

Peter Chin, Malaysia’s minister for plantation industries and commodities, said that his country would swap palm oil for rice with any nation willing to make the trade, as it struggles to shelter its people from record rice prices as well as expand its diminished “buffer” stockpile.

The Malaysian proposal emerged on Wednesday as the price of Thai 100 per cent B grade white rice – used as one of the benchmarks for global prices – surged back to its record high of $1,000 per tonne after Malaysia bought 200,000 tonnes of rice.

Commodity traders in Tokyo said that Malaysia’s decision to opt for off-market barter was a clear sign that food as an asset class is in crisis.

Kenji Kobayashi, a commodities analyst at Kanetsu Asset Management said: “What is worrying is that these barter deals, which should only be for truly terrible situations like the Iraq oil-for-food programme, are only going to increase in size and number from here. We are now seeing all the hidden mistrust in the markets being expressed through barter.”

The unusual offer – apparently open to every rice-producing nation on earth – marks a vote of no-confidence in commodity markets by a country that owes more than a quarter of its GDP to crude oil and palm oil exports.

“Currently Thailand is our main supplier of rice, but we are ready to offer palm oil to any exporting country that is ready to give us rice of suitable quality," said Mr Chin.

Recent volatility in food prices, and the emergence of rice as an asset now thought by some to be on a strategic par with crude oil, have shaken many countries’ faith in the ability of global markets to properly price food.

As the crisis has deepened, and several large rice-producers have curbed exports for the sake of domestic calm, various barter deals are thought to have been struck behind the scenes. But none have been as open as Malaysia’s offer, which analysts warn could trigger a spate of copy-cat exchanges.

At a bare minimum, said Malaysia analysts at CLSA, Malaysia’s decision is going to affect the issue of regional rice diplomacy at a sensitive time.

Malaysia is both a major world producer of palm oil and reliant on imports for about a third of its annual rice consumption; palm oil is itself in demand and prices have rocketed amid increased demand from China and India.

But commodities experts said it would be highly unsettling to orderly markets if other raw materials like rubber, rare metals or even energy were suddenly moved around in a series of large off-market deals with no formal pricing.

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