Global rice prices forecast to rise soon

June, 13 2011
By Le Hung Vong
VNS

World rice prices have remained stable for the past year but that could change soon.

According to the Manila-based International Rice Research Institute (IRRI), rice prices have remained relatively stable, rising only 17 per cent since June last year against a 50-150 per cent hike seen in the prices of other crops.

This has been mainly due to the increased supply. In 2010 Thailand, Viet Nam, and the US exported 9 million tonnes, 6.8 million tonnes, and 5.5 million tonnes respectively. With weather conditions being favourable, rice production in Cambodia, India, and Bangladesh is expected to increase this year.

The IRRI said, however, the rise in the prices of other crops could make some Asian countries like Indonesia, Myanmar, and Bangladesh either expand their reserves or impose bans on rice exports.

Global rice prices, which are expected to increase anyway this year due to the drought in China, would be forced up by the policy, though they are unlikely to hit the records seen in 2008 in Asia.

"Global prices may rise on a possible increase in demand, but they definitely would not rise as high as Thai prices, which would be distorted by government intervention," Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, was quoted by Reuters as saying.

The Puea Thai (For Thais) Party, which broadly supports former PM Thaksin Shinawatra, says it will buy (unmilled) rice directly from farmers at 15,000 baht (US$496) a tonne if it wins the July 3 election.

That intervention price, some 80 per cent above the current market of 8,000 baht per tonne, would force up export prices (of Thai rice) to as high as $870 a tonne, over 74 per cent above the current $500, traders said.

"That would lead to a collapse in Thai exports. Export could drop to as low as five million tonnes next year as we cannot compete with such high prices," Chookiat said.

Thailand aims to export 9-9.5 million tonnes this year. A drop to 5 million tonnes could push it to second place behind Viet Nam who has offered price of $465 per tonne for premium grade 5 per cent white rice.

According to the Viet Nam Food Association, Viet Nam can ship 3.85 million tonnes in the first half and a total of 7-7.4 million tonnes in the whole year.

Kanawat Wasinsungworn, deputy leader of Puea Thai, told Reuters the new Government would look to co-operate with Viet Nam in the rice market and possibly try for an OPEC-style cartel that could influence world prices.

Meanwhile, in May 2011 Cambodia offered to sell rice at prices lower than Thailand and Viet Nam to win contracts to supply the Philippines, the world's largest importer.

The Philippines National Food Authority's announcement of slashing spending on rice imports from 2.25 million tonnes in 2010 to 860,000 tonnes this year has also diminished opportunities for Viet Nam and Thailand as Manila also looks to add Cambodia as a lower-cost alternative.

However, Cambodia still has a long way to go before it can turn a paddy surplus estimated at just under 4 million tonnes this year into processed rice of a quality ready for shipment given inadequate infrastructure, high electricity prices, and a lack of financing options in the industry.