Standard Chartered Bank sees rice prices may soften on better harvests, slowing demand

Rice prices are likely to soften in view of improving global harvests and slowing demand, especially with significant imports by India, to overcome the production fall in the kharif season, being ruled out. A Commodity Outlook by Standard and Chartered Bank said the prospects of large rice import bill have receded. It also cut the expected average price for Thailand B grade 100 per cent rice this season to $544 a tonne from $593. “Overall, the sentiment has been adversely affected by the likelihood of burgeoning global grain stocks, which will make it difficult for the market to recover from current subdued levels,” the bank cited as reason for the downgrade in its outlook. CBOT rice Pointing out that rough rice prices on the Chicago Board of Trade (CBOT) had declined 20 per cent this year after rising to a 16-month high in December, the bank said during the same period, physical price of Thai rice dropped 10 per cent. “The decline in both CBOT and physical rice prices has been triggered primarily by increased supply as the harvest in Asia and North America progresses, and the ample supply of substitute foodgrains, such as wheat. We believe that the previously expected large import bill from India will not materialise and that prices will remain under pressure over the coming months, it said. Rice prices had gained in November when India, the second-largest rice producer in the world, said it would import about two million tonnes (mt) of rice for the buffer stocks to overcome the anticipated production shortfall. The kharif rice crop was first hit by a prolonged dry period and then by untimely rains. This led to nearly 15 mt drop in the kharif production to 69.45 mt. Indian output The global market's panic intensified as importing nations such as the Philippines after India issued a tender to import 30,000 tonnes rice. The Philippines ring-fenced its imports and it lead to panic, pushing up the prices further. Rabi production estimates of over 15 mt rice production have cooled the market, though the shortfall remains. However, the net impact of the drop in Indian production on global output is less significant. The US Department of Agriculture estimates global rice production for 2009-10 at 440.3 mt, fractionally below last season's record 447 mt. This will be the second-highest global output on record. Indonesia scene Prospects in Indonesia that accounts for around 10 per cent of the global output have improved due to a weaker El Niño event improving irrigation reservoir levels. Better seed varieties in Indonesia have also helped improve yields, the bank said. Despite production fall in India, the global end-season stocks are unlikely to drop by over one per cent year-on-year. Moreover, the wheat output in India has been largely unaffected, with the production being estimated at around 82 mt. All these factors will only lead to a limited demand pressure on global grain stocks, the outlook said.

India leaves minimum export price on basmati rice unchanged

India ruled out any plan to increase the minimum export price of basmati rice for now, said country’s Agriculture and Food Minister on Thursday. Talking to reporters, after a high level ministerial panel’s meeting, Sharad Pawar said, the Commerce Ministry withdrawn the proposal and will continue to keep floor price at $900 a tonne. Earlier, the government decided to raise the floor price of basmati rice from current level to $ 1100 per tonne in order to boost domestic supply in the wake of shortage in output due to the weak monsoon. However, the government has envisaged another plan augment the supply of cheap food grains to poor in the country. Pawar said the Central government has drafted a law that ensures cheap food grains to poor in the country. The law would take to cabinet for the approval in the next week, said the Minister. Food prices rose 16.3% from a year earlier in the first week of March. Last month, Finance Minister Pranab Mukherjee said in his annual budget speech that the food security law will be introduced soon, amid widespread concern that another year of bad monsoon could hit the country’s ability to feed its millions. India last year received the lowest monsoon rainfall in nearly four decades, which hit production of summer-sown crops, mainly of rice.

Guyana may have a good rice crop

Chairman of the Agriculture Committee of the Private Sector Commission (PSC) and veteran local rice farmer Beni Sankar has told Stabroek Business that a good rice yield is still possible despite the protracted period of dry weather resulting from the current El Nino weather phenomenon. Sankar told Stabroek Business that farms where the current spring crop is currently under cultivation remain under water, albeit at reduced volume. Sankar said that the lesser volume of water places the fields in closer to ideal conditions, increasing the possibility of higher than normal yield per acre. Sankar, who has more than fifty years experience in rice cultivation explained that in conditions of normal seasonal rain some farmers are inclined towards excessive flooding of fields resulting in the efficient growth and development of the rice stalk. Sankar said that while irrigation practices have allowed for water levels of up to a foot in rice fields, all that is needed for the proper growth of paddy is one inch of water. “With the right amount of water the plants get to spread, there is better photosynthesis, the fertilizer does not get washed away but remains in the field to nourish the plant,” he said. “Once you are not using too much water and flooding the plant, and the plant is getting a chance to grow it would be healthier and stronger,” Sankar said. Sankar told Stabroek Business that his own rice lands on the Essequibo Coast have not benefited from the El Nino conditions. He explain-ed that in the case of his own rice lands the challenge associated with irrigating the field to the optimum one inch level is related to the layout of the land. While some areas secure the requir-ed volume of water, rice plants in other higher areas receive no water and are “parched out.” He said that small farmers who can identify the high areas in their plots and level them off are likely to find crop management easier in the current El Nino conditions. Larger farmers, on the other hand, are likely to experience greater losses, Sankar said. He said that the only solution to the problem lies in the application of laser-guided levelling machines. Reflecting on the debilitating conditions resulting from the current El Nino phenomenon, Sankar told Stabroek Business: “All that is bad is not bad. Those who survive could be better off.” Sankar said that as a large scale farmer he expects more loss per acre. He anticipates his yield for this current spring crop at around 32 bags of paddy per acre. Sankar said that small farmers who are able to irrigate their lands more effectively in the current conditions can perhaps anticipate yield at around 40 bags per acre. The current crop of paddy, for which reaping has begun, was sown in November and December last year, around the same time that Guyana begun to feel the effects of the El Nino weather phenomenon.

India Says ‘No Immediate Plan’ to Allow Wheat Exports

India, the world’s second-biggest wheat grower, has “no immediate plan” to lift ban on exports and will instead boost open-market sales and increase supplies to the poor to pare stockpiles, Farm Minister Sharad Pawar said. “There is no question of allowing wheat exports,” he told reporters in New Delhi. “We will consider allocating more wheat to the Above Poverty Line families.” Retaining the curb may ease pressure on wheat prices which have slid 27 percent from last year’s high of $6.77 a bushel in Chicago amid increasing world supplies. Global output may total 678 million tons, up from 677.441 million tons estimated a month earlier, the U.S. Department of Agriculture said March 10. May-delivery wheat fell as much as 1.2 percent to $4.905 a bushel on the Chicago Board of Trade, after closing 1.9 percent higher yesterday. India’s government needs to empty its warehouses to create room for this year’s record harvest, Pawar said March 4. Output may top 80.28 million tons, swelling reserves to 14.71 million tons on April 1, twice the quantity needed to meet emergencies. Reserves on March 1 were 18.38 million tons, more than four times the buffer requirement, according to farm ministry data. “Storage is a worrying factor,” Pawar said today. Stockpiles of wheat and rice totaled 47 million tons as of March 1, prompting the finance ministry to say last month that “urgent attention” must be given to paring storage costs that are placing a “lot of stress on the fiscal system.” India halted exports of wheat in February 2007 and common rice varieties in April 2008 to cool domestic prices.

Thai priem minister vetoes pumping up paddy price by 200 baht

Prime Minister Abhisit Vejjajiva has put the brakes on a Commerce Ministry proposal to raise the buying price for paddy by 200 baht, saying that higher-than-market prices would affect the government's rice insurance scheme and confuse farmers. Commerce Minister Porntiva Nakasai said the premier had instead directed the ministry to study other ways to shore up rice prices. The Commerce Ministry recently came up with a plan to raise state buying prices for paddy by 200 baht per tonne from the current benchmark prices now set at 8,919 baht per tonne as a way to overcome the domestic paddy price slump, especially for 5% white rice. The price increase was meant to drive up market prices and cut the price gap between market rates and the government's insurance scheme, reducing the government's compensation as a result. The Democrat-led government first introduced the crop insurance or options programme for the 2009-10 harvest season to manage key crop prices and guarantee farmers' incomes. It replaces a pledging scheme used by successive governments that offered high prices and proved to be politically popular in rural communities. The new price insurance scheme represents income support paid directly to farmers. Payments will be based on the difference between insured prices and benchmark prices, regardless of the market prices farmers receive when they sell their crop. The insured prices are based on average costs and a profit margin of 30% to 40%. The benchmark prices are based on the weighted average wholesale prices of rice in Bangkok equivalent to paddy with less than 15% moisture content. The benchmark price is set on the first and sixteenth days of each month. The programme is designed to benefit all farmers, particularly small-scale operators. Compensation will be transferred directly to farmers by the Bank for Agriculture and Agricultural Co-operatives (BAAC). Farmers will manage their own sales decisions in terms of when to capitalise on the spread between the insured price and the benchmark price. "I must admit it will be tough to attract millers to participate in the government's rice-buying scheme, as traders by nature want to buy cheap," said Mrs Porntiva. Traders and millers mostly prefer the pledging scheme, as they earn extra revenue from rice polishing and warehouse rentals for storing government rice.

Business worried about strong baht

The private sector was concerned about the strengthening of the baht's value as it could hurt trade negotiations and exports from the second quarter of the year onward, Commerce Minister Porntiva Nakasai said. “The private sector wants the government to closely oversee the baht’s movement to ensure that its will not be too much fluctuation or too strong. The strong baht will affect the country’s trade competitiveness,” Mrs Porntiva said on Thursday. The commerce minister believed the strong baht would be only short-lived as the Bank of Thailand is capable of curbing its value. Her ministry stood by its export expansion target for this year at 14 per cent. The chairman of the Rice Exporters Association, Chukiat Opaswong, predicted that if the value of baht stands at 33 baht per US dollar, rice exports in March will go down to 650,000 tones and 600,000 tonnes in April, from 700,000 tonnes a month in January and February. Mr Chukiat said the country has already lost its competitiveness in trading in white and jasmine rice because our prices are now about $200 to $300 a tonne more expensive than those of other Asean members. He said rice exporters will ask the Commerce and Finance ministries to find ways to curb the baht's value. “The baht is now the strongest currency in Asean, forcing Thailand’s trade partners to ask for a price review. There is a concern that the buyers will cancel their advance purchasing deals in the next one or two weeks,” he stated.

S.E.Asia dry spell thins palm, rubber supply; threatens rice

A severe dry spell across a wide swathe of Southeast Asia threatens to curb output of palm oil and rubber, while the weakest rainfall in more than a decade may cripple rice planting in top exporters Thailand and Vietnam, according to a Reuters report on Thursday, March 18. The resurgence of an El Nino weather pattern in a region that is the world's biggest producer of palm oil, rice and rubber and a key supplier of coffee and cocoa has brought hotter weather to farms and PLANTATION []s, drying out trees and sapping yields. Taking the brunt of the harsh weather are Thailand and Vietnam, which together furnish half of world rice exports of about 30 million tonnes a year; some stretches of the island of Borneo and pockets of Indonesia, the world's largest palm oil producer; and even Australia is being affected slightly. Falling palm oil supplies from Malaysia and Indonesia, responsible for 85 percent of global production, could stiffen Malaysian benchmark futures , now up 45 percent from January 2009 lows. The Tokyo rubber market should climb in March, bolstered by strong demand and a sharp decline in supply, which have pushed physical prices to 58-year highs. "It looks quite severe as of now, and of course, everyone is hopeful this won't last, and the weather will be back to normal, but so far we haven't seen that," said analyst Ivy Ng of investment bank CIMB in Kuala Lumpur, who tracks palm oil firms. "If there are no rains until June, the trees will be stressed and it could have impact on production in the second half of the year or even in the first half." Poor rains in Indonesia, the world's largest palm oil producer, mean this year's output will miss the industry target of 21.5 million tonnes by about 5 percent. Neighbouring Malaysia is also likely to see production drop, just as the trade geared up for a seasonal output rebound. Planters in Malaysia's top palm oil producing state of Sabah on the island of Borneo say continuing hot weather could chip 10 percent off production this month after February's monthly slide of 15 percent. The situation is no better in peninsular Malaysia. "We only get very light showers in the morning, after that its good-bye, rain," said an official with a palm plantation in Sabah. "On the roadsides leading to the plantations, the grass is turning brown." COULD STRETCH INTO 2011 The dry weather could stretch far into 2011, analysts warned, shrinking output and supplies. "The current lag in palm oil output is due to last year's dry weather," respected analyst Dorab Mistry, head of vegetable oil trading at India's Godrej International, told Reuters. "The dry weather of 2010 will hurt production in the fourth quarter and first quarter of 2011." The situation is not too different for rubber, chiefly produced by Thailand, Indonesia and Malaysia, where the industry expects a downward revision in output as trees hit by moisture stress look likely to produce less latex. Thai rubber production in 2010 will miss a January forecast of 3.15 million tonnes by 5 percent because of the dry weather, a senior industry official said. "This year we would have around 3.0 million tonnes as the weather is expected to be very hot and dry," Luckchai Kittipol, president of the Thai Rubber Association, told Reuters. Poor rains may have spared rice in Thailand and Vietnam so far, but dry weather could force farmers to plant fewer acres with the next crop, although ample stocks make a big impact on benchmark Thai prices unlikely. Apichart Jongsakul, secretary general of Thailand's Office of Agricultural Economy, said the government had asked farmers to grow less off-season rice as key reservoir levels had dropped. "We now expect to have around 7 million tonnes of paddy rice from the second crop, down from around 8 million forecast earlier," Apichart said. MEKONG DELTA PARCHED Dryness brought by El Nino has parched Vietnam's southern Mekong Delta which could threaten planting for summer-autumn crop, the country's 2nd highest yielding crop. The world's biggest rice buyer, the Philippines, is suffering its worst dry spell since 1998, having lost more than 200,000 tonnes of paddy so far, which could drive it to import as much as 3 million tonnes of rice, officials say. Rice imports in 2010 already stand at a record 2.45 million tonnes. The situation is not ideal for the wheat crop in Australia, the world's fourth largest exporter, where the weather bureau predicts a 50:50 chance of normal rains in the crucial planting period between March and May. Rain could also be below average at the same time in the southwest of Western Australia, the country's top grain-exporting state, the bureau said. Still, Australia's second largest grain producting state, New South Wales, among those worst affected by drought in recent years, has staged a remarkable turnaround since the start of 2010, as the area officially declared in drought dropped by half. - Reuters

COFCO launches rice processing base in Jilin

COFCO Group, which is a leading foodstuff company in China and is controlled by the central government, on Mar. 16 inked an agreement to build a base for rice processing in Jilin Economic and Technological Development Zone in Jilin Province, sources reported. The state-owned food giant intends to invest RMB 600 million in the project, which will have an area of 20 hectares and will be able to process 300,000 tons of rice per year. The sales revenue of project is expected to exceed RMB 700 million. China Agri-Industries Holdings Ltd<0606>, a subsidiary of COFCO Group, plans to invest in non-grain ethanol plants in Guangdong Province and Hainan Province, said Ning Gaoning, board chairman of the parent. However, the plan is subject to approval from the National Development and Reform Commission.

India's rice purchases from farmers fall 2 pct-govt

India's rice purchases from farmers have fallen 2.4 percent since October, when the current marketing year began, the government said in a statement on Wednesday. Purchases between Oct. 1 and March 16 were at 24.3 million tonnes, down from 24.9 million tonnes in the same period a year earlier, it said. State-run agencies buy wheat and rice from domestic farmers to build strategic stocks for emergency needs, supply grains at cheaper rates to the poor and protect farmers from distress sale. India, the world's second-biggest producer of rice, had bought 33.7 million tonnes of the grain from local farmers in 2008/09. The country last month forecast summer-sown harvests of the grain, hit by last year's weakest monsoon in 37 years, at 72.87 million tonnes, 14.2 percent lower than a year earlier. In December, the government had forecast summer-planted rice harvest, which normally accounts for 80 percent of India's total rice output, at 71.65 million tonnes. Farmers plant the summer-sown varieties in the monsoon months of June and July and harvest the crop from October.

Sri Lanka rice update

A paddy harvest of 2.6 million metric tons is expected from the current Maha season harvest. The total paddy output of the year is expected to be 4 million metric tons. Unlike previous years, there is no maximum limit on paddy purchased from farmers. Eighty paddy purchasing centres are operating islandwide with a number of additional storage centres opened. Despite much outcry on the contrary, current purchase prices for paddy is set to provide maximum benefit to the farmer while offering reasonable utility to the consumer. The minimum purchase price of 1 kilo is currently Rs.28 for Nadu and Rs.30 for Samba. A further increase in purchase price will raise the retail price to over Rs.80 per kilo, causing much discomfort to the consumer. Additional Secretary (Services), Ministry of Agriculture Development and Agrarian Services, M.H. Muineed, made these comments in answer to allegations raised by the Opposition that had they been in power, the purchase price would be in a range of Rs 35 - Rs 45. He further stated that complaints of paddy prices as low as Rs.18 in certain areas was due to the low quality, specifically undried paddy being put up for sale immediately following harvesting. To prevent a paddy shortage arising due to wholesalers withholding stock, a buffer stock of 15 percent of the monthly consumption need is to be maintained this year. The aggregate amount is far higher than last year’s annual buffer stock of 50,000 metric tons. Under the ‘Api Wawamu Rata Nagamu’ food production program, 2010 is set to see much expansion in the agriculture sector. A sum of Rs. 750 million has been allocated for this year’s projects by the Treasury. Special prominence is to be given to development in the North under the ‘Uthuru Vasanthaya’ program. A sum of rupees ninety thousand has been allocated for this purpose. Eighteen thousand hectares of abandoned paddyfields are planned to be cultivated this year.