SINGAPORE: Asiaâs bulging stocks of rice, coupled with the waning appetite of top buyers, will keep a lid on prices of the grain in coming months, promising relief to food importers grappling with a one-third jump in the prices of corn and wheat since mid-June.
Top rice exporters India and Thailand are sitting on hefty stockpiles of the grain ahead of new crop harvests, while leading buyers Manila and Jakarta are likely to reduce purchases amid bumper domestic crops.
A limit on rice prices will ensure sufficient supplies for some of the poorest nations in Asia and Africa, all but ruling out the kind of panic buying seen in 2008, when fears of supply shortfall drove Thai rice RI-THWHB-P1 to all-time highs of US$1,000 a ton.
âThe dynamics are totally different â rice is not going to go the way corn, soybeans and wheat have gone,â said Darren Cooper, a senior economist at the International Grains Council in London. âIt is the picture we see on the supply side which is really bearish for the market.â
The council, a research body funded by buyers and producers, expects world rice trade in 2012 to fall about 4.7% on the year, to around 34 million tons, as top buyers reduce purchases because of the better yields brought by good weather.
Thailand, usually the worldâs biggest rice exporter, is estimated to have accumulated a record 10 million tons of rice, or nearly a third of annual global trade, after a government intervention scheme made exports unviable.
In a populist move designed to shore up its support, the Thai government bought rice from farmers at prices on average 40% higher than prevailing market rates, stuffing the countryâs silos with grain that has proved difficult to sell as supplies pile up elsewhere.
In India, stocks of rice stood at 30.7 million tons on July 1, enough to meet world demand for almost a year, despite the country having sold some 5 million tons since last September.
That is driving down prices.
Actively-traded 25% broken Vietnamese rice is being offered around US$377.5 a ton, down 16% since the beginning of the year. Indian common rice varieties are quoted around US$375 to US$425 per ton, making exports attractive.
In contrast, benchmark Chicago corn and wheat have surged close to 40% in the last four weeks as a worsening drought in the US grain belt curbs yields with each passing day.
Desperate to sell
Thai authorities are desperately seeking buyers for their rice before new-crop supplies start flowing in from October and the country is left with few options but to sell at a discounted prices in government-to-government deals.
âThey have to sell in order to make space before new supplies start,â said one trader from Bangkok. âEveryone is waiting to see what they do.â
But the Thai government sold none of the 250,535 tons of rice offered from its stocks in a tender last month.
As Thailand sits on its expensive rice, Indian exporters will capitalise on the situation, even if the country receives sparse rainfall from the monsoon season now underway.
âIndian supplies will continue even if the monsoon rains fail this year as the rice stocks are really huge,â said Vijay Setia, former president of the Rice Exportersâ Association of India.
Traders in Vietnam expect rice prices to stay under pressure as domestic supplies rise and India continues exports. âPrices in Vietnam will depend on Indian rice and only have a chance to rise if India stops exporting,â said one trader at a foreign firm in Ho Chi Minh City.
Indonesia is unlikely to import rice in 2012 and is forecast to have a surplus of 5.5 million tons of the staple by yearâs end, state procurement agency Bulog said this month.
The Philippines, which was the worldâs largest rice importer in 2010, aims to be self-sufficient in rice by the end of 2013.
“Next year, I think we could reduce rice imports to not more than 100,000 tons, just enough to make sure we have ample stocks at the National Food Authority,â said Dante Delima, head of the governmentâs National Rice Programme.