Ample supply spares rice from Asia food price squeeze

Reuters: Ample rice supplies from top exporters Thailand and Vietnam should keep prices in check through the first quarter, sparing Asia’s staple food from the rally in commodity prices that has driven food inflation to the top of policymaker agendas.

Rice prices fell last year even as a sharp rally on other grains contributed to rising global food prices.

The benchmark price is around half the peak of 2008, some relief to regional governments who faced riots when prices rallied two years ago.

Benchmark Thai rice RI-THWHB-P1 dropped 13 per cent in 2010, while U.S. wheat Wc1 and corn Cc1 futures climbed around 50 per cent as adverse weather hit key producing regions.

Record high

Despite little change in rice, global food prices hit a record high in December, and key grains are expected to climb even further on adverse weather patterns, the UN’s food agency said this week. The world’s second-largest exporter Vietnam was forecast to enjoy a bumper next crop, while top buyer the Philippines has said it would halve imports in 2011. These two factors alone should ensure a comfortable supply-demand balance for some time, analysts said.

“Vietnam is about to harvest its main rice crop in February and production should peak in March and both Thai and Vietnamese rice prices are expected to drop,” said Kiattisak Kanlayasirivat of Novel Agritrade, a leading rice trader in Bangkok.

Still, there were some potentially bullish factors. Top exporter Thailand has lower stocks than in late 2009 and early 2010. India, previously a leading exporter, was expected to maintain curbs on exports.

Even if prices were to rise, gains would likely be modest, Kanlayasirivat said.

The benchmark 100 per cent B grade Thai white rice slipped $5 to trade at $535 per tonne this week, the lowest since November and U.S. rice futures RRc1 have dropped more than two per cent this week.

That compares to a peak of over $1,000 a tonne in 2008, which prompted several governments at the time to impose export curbs to protect their domestic markets.

Harvest pressure, steady demand

Vietnam, where rice harvest is due to start next month, is expected produce a total of 40 million tonnes of paddy in 2011, according to industry estimates, up from 39.9 million tonnes in 2010 and 38.89 million tonnes in 2009.

The Vietnam Food Association has not forecast any prices for 2011 but it said it will stockpile at least one million tonnes during the harvest between late February and April of the winter-spring crop, the country’s largest. On Friday, the Philippines, the world’s largest buyer of rice, reiterated that imports of rice would be half or less than record imports for 2010.

The country bought a record 2.45 million tonnes of rice to meet its 2010 needs, but the government wants to become self-sufficient in rice production in 2013.

The Philippines had enough rice stocks to last at least two months, giving it time to decide its import needs, Agriculture Secretary Proceso Alcala, told reporters. Previously, the import process has started in the final quarter of the preceding year.

Replanting

In Thailand, replanting by farmers will offset any shortfall in production arising from floods last year, traders said.

“Farmers whose crop was damaged by recent floods have started replanting off-season crop which means that production of the second-smaller crop due to be harvested in March should be higher than expected,” said Chookiat Ophaswongs, president of the Thai Rice Exporters Association.

The country aims to export 9.0 to 9.5 million tonnes in 2011, Commerce Minister Porntiva Nakasai told reporters on Friday.

The world’s fifth-largest rice exporter, Pakistan, exported 4.5 million tonnes of rice in 2009/10, traders say, after it had a bumper crop of 6.7 million tonnes of milled rice in 2009/10.    The country’s top export body, the Rice Exporters Association of Pakistan, said in December it expected nearly 6 million tonnes of milled rice from the 2010/11 crop, after initial fears production may fall due to devastating summer floods.

Rice prices could still find some support from the fact that stocks in Thailand have dropped to around one million tonnes from an abnormally high stockpile of 7 million tonnes at the end of 2009, when the government bought rice at high prices from farmers, making Thai exports uncompetitive in the international market.

Indian curbs

India, which was the world’s second largest exporter in 2006/07, is widely expected to continue with curbs on rice exports imposed in the crisis of 2008, despite higher stocks and calls by the industry to free up overseas sales.

On 1 December, rice stocks were at 22.9 million tonnes, substantially higher than a target of 5.2 million tonnes. The country does not allow exports of common grades of rice, while shipments of aromatic basmati are permitted with a floor price of $900 a tonne.

“What is the harm in allowing limited exports? I know food inflation is too high, but rice has not contributed to it at all,” said Vijay Setia, president of the All India Rice Exporters’ Association.

“If the government is keen to continue with the ban on the exports on non-basmati rice, it must permit some premium varieties from common grades.”

Ensuring food security

Bangladesh paid a higher cost to import 250,000 tonnes of rice from Vietnam in a bid to ensure food security, a senior food official said on Friday – typically the type of action that makes rice vulnerable to price rise despite comfortable supplies.

The price for 200,000 tonnes of 15 per cent broken white rice to be supplied by Vinafood 2 is $545 a tonne, including cost, insurance and freight, compared with $389 per tonne it paid in August.

“Our main focus is to ensure food security in the wake of a global commodity price hike. That’s why we had to go for costly imports to build up our reserves,” said Ahmed Hossain Khan, Director General of the State grains buyer.