Thai Rice Damage May Push Up Global Prices, Mohanty Says

Oct 12, 2011
By Pratik Parija and Supunnabul Suwannakij
Bloomberg

Damage to rice crops from Thailand to Philippines may “push up” prices this year as global production of milled rice may be less than previously forecast, according to the International Rice Research Institute.

Flooding in Thailand, the biggest exporter, may have damaged as much as 5 million metric tons of paddy, while a typhoon in Philippines and flooding in Cambodia and Laos will trim rice output, Samarendu Mohanty, a senior economist at the institute, said in New Delhi today. Global production of milled rice may be as low as 455 million tons in the year that began on Sept. 1, less than the 460 million forecast last month, he said.

Reduced rice supplies, the staple for half the world, may fuel a 21 percent rally in prices in the past year in Chicago and boost global food costs that the United Nations predicts will remain high and fluctuating as demand rises because of economic growth. Damage to crops may boost import demand for rice, Robert Zeigler, director-general of the institute, said in a separate interview.

“There will be supply-demand imbalances by the end of this year and early 2012,” he said. “There may be price volatility in rice because of weather problems.”

Prices of Thai white rice may climb 21 percent to $750 a ton from $619 a ton today because of crop damage and Thailand’s plan to buy rice from farmers above market rates, said Sumeth Laomoraphorn, chief executive officer of C.P. Trading Co., Thailand’s fourth-largest exporter. Rough-rice futures for November in Chicago climbed as much 1.6 percent to $16.23 per 100 pounds today.

Thai Stockpiles

Thailand last week started a government-purchase program, at prices as much as 44 percent above market rates, to boost crop prices and rural incomes. Global rice prices will depend on what Thailand does with the rice it buys from growers, rice institute’s Mohanty said.

“The damage to the crop in Thailand might put upward pressure on prices,” Mohanty said in an interview. “Thai export policy is not very clear. Global prices will depend on the rice export policy in Thailand.”

Flooding devastated crops mostly in Chao Phraya basin in central Thailand and paralyzed shipments, C.P. Trading’s Sumeth said by phone today. The nation’s exports may halve to about 500,000 tons a month from October to December, he said.

“Thailand, Cambodia and Vietnam are facing the same destiny but supplies from India will make up for the decline in production, limiting a chance of rice price rally,” Sumeth said.

Indian Exports

India, the world’s second-largest producer, allowed private companies to export non-basmati rice for the first time in more than three years in July after state-run stockpiles reached a record. Shipments from the South Asian nation may total 4 million tons in the year from April 1, according to the All India Rice Exporters Association.

Indian shipments will account for 11 percent of global trade this calendar year, overtaking the U.S. and Pakistan to become the third-largest shipper, according to the U.S. Department of Agriculture, or USDA, in a Sept. 12 report.

“India should export more to benefit at a time when Thai rice is not very competitive,” Mohanty said.