Rice Prices Set to Keep Rising

Rice Prices Set to Keep Rising
Supply for exports will be further limited by a government program that will buy most of the rice from farmers at 15,000 baht ($485) a ton, around 40% above market rates for unmilled rice.


Global rice prices may move up further in the next few months as flooding in Thailand continues to affect the crop and damage existing inventories.

Importers are looking for alternative supply, but the perception gaining ground is that despite cheaper rice available from sources such as India and Pakistan, they won’t be able to do without any supply from Thailand and Vietnam. The two control more than half of the rice moving in global trade, which amounts to around 32 million tons a year.

Vietnamese prices have moved up in tandem with Thailand’s, hitting three-year highs with more expected. The price for a ton of Thai 5% broken grade rice, currently about $600, free-on-board—up 20% since the start of the second quarter—is forecast to hit $700 to $800 by the end of the year.

The damage due to floods is worse than was initially feared. The loss is the equivalent of around three million metric tons of milled rice, or 20% of the country’s main rice crop, said Jeremy Zwinger, chief executive of the Rice Trader, a California-based consultancy.

Supply for exports will be further limited by a government program that will buy most of the rice from farmers at 15,000 baht ($485) a ton, around 40% above market rates for unmilled rice.

Rice, the world’s most widely consumed staple food, is Asia’s the leading food crop. Food prices were a major factor in accelerating inflation around Asia earlier this year, and even where overall inflation has slowed, food-price pressure remains. China’s consumer price index in September was up 6.1% from a year earlier, compared with August’s 6.2%—but food prices were up 13.4%, nonfood prices just 1.1%. Wholesale food inflation in India hit double digits in the week ended Oct. 8, with prices up 10.60% from a year earlier, the biggest jump in six months.

While floods are hitting Thailand, dry weather in the U.S. has cut production there, which normally accounts for more than 10% of the global rice trade. The International Grains Council has forecast U.S exports to fall 14% in the year ending next July 31.

Indonesia, the world’s largest importer of rice, may buy directly from government agencies in India and Pakistan, said Mohammad Ismet, an advisor Bulog, the country’s government-run procurement agency. Angelito Banayo, administrator of the Philippines National Food Authority, echoed that sentiment—though the Philippines has long-term supply agreements with Thailand and Vietnam.

With Thai and Vietnamese prices rising, India has already become a significant global supplier, offering rice in a recent Iraqi tender and to the United Nations’ World Food Program. Officials have said India will export at least two million tons of ordinary rice over a period of four to six months—but inland transportation and port constraints may limit the country’s overall monthly exports including premium Basmati grades to 500,000 tons a monht, the consultant Mr. Zwinger said.

Pakistan is also expected to export an additional one million tons of rice in the marketing year starting Nov. 1, said Fuad Hamid Garib, director at Garibsons Ltd., one of the country’s leading rice exporters.

Such sales notwithstanding, importers including poverty-stricken sub-Saharan Africa will still need 12 million to 15 million tons of rice from Thailand and Vietnam in the next year, and that may have to be bought at sharply higher prices.

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