Speculation about aggressive intervention by the new government in Thailand, the world’s biggest rice exporter, has pushed the benchmark price, for Thai white rice, to $615 a tonne.
That is the highest level since December 2009, even though demand has remained thin. The rally coincides with higher prices for other staples, reigniting worries about food inflation at a time when the global economic outlook is grim.
Asia is home to the world’s top rice consumers and producers, as well as its two most populous nations, China and India, which both have declared war on inflation. Rice prices are up more than 30 per cent since an April low, but traders said plentiful supplies meant prices were unlikely to see a repeat of 2008, when the benchmark price rose to a record of more than $1,000 a tonne and Vietnamese rice followed suit. Thailand and Vietnam are on track to produce bumper crops.
India, the world’s second-biggest rice producer, after China, is expected to return to the market soon after the government’s easing in July of an export ban that had been in place since 2008.
The first round of Indian exports, totaling one million tonne, has been blocked by a court after exporters complained about quota allocations, an issue the government is resolving. “The market is reasonably well-supplied, and buyers are not rushing to cover, as the price rise has been quite dramatic,” said Vijay lyengar, managing director of Agrocorp Internation al, a regional grain trader based in Singapore.
“I see limited upside for rice, and when the Indian situation gets resolved you will find additional material coming into the market,” he said. Traders forecast that Thai rice prices would peak at about $700 a tonne this year.
Vietnamese traders also said that prices could advance $20 to $30 a tonne but that they would not reach the record high hit in April 2008. Vietnamese 5 per cent broken rice was at $550 to $565 a tonne last week, up about 18 per cent in a year.
The world’s top buyers in Asia, the Middle East and Africa are expected to hold back after the price of Thai white rice jumped more than 10 per cent in August. Traders in Bangkok said they did not expect any major deals within the next few months.
Vietnam is expected to finish harvesting its second rice crop in two weeks, while a minor crop will be ready by the end of this year, helping lift output this year by 4 per cent to 41.6 million tonne, according to the country’s farm ministry.
India is also expected to add to those plentiful supplies. “India can export 3 million tonne of common grade rice and 2.5 million tonne of basmati rice until September next year,” said R S Seshadri, director of Tilda Riceland, a leading rice exporter in New Delhi. Swollen reserves may also force the Thai authorities to offload stockpiles in the international market at a discount, as they did in 2009, when reserves ballooned to seven million tonne and the government sold rice to exporters in private deals to avoid public criticism.
Logistically, it would also be impossible for the Thai authorities to buy the entire volume of rice that comes into the market, leaving room for private exporters to step in. The government is also probably thwarting its own inflation-fighting efforts by providing farmers with higher rice prices, analysts said.