Analysts said India might look for cargoes after New Delhi scrapped import duty, but the move is unlikely to drive Thailand's benchmark 100 percent B grade rice anywhere close to last year's record of $1,080 a tonne -- thanks to adequate world supplies and good crop conditions in most producing countries.
"I will be very surprised if they were to buy significant quantities of rice as we have seen in the past. When rice output falls, they tend to reduce consumption and drawdown stocks," said Darren Cooper, a senior economist with the International Grains Council in London.
The talk of rice imports by India, at a time when the typhoon-stricken Philippines is in the market earlier than usual, boosted U.S. rice futures to a 10-month high on Thursday.
India lifted a 70 percent duty on rice imports this week as drought has fed fears its output of the staple would fall around 17 percent, firing market speculation the country will need to import up to 3 million tonnes to bridge the supply gap.
"There is no question that between the Philippines, India and probably Indonesia, there will be heavy demand for rice," Bob Papanos, a director of Houston-based Seacor Commodity Trading LLC, told Reuters at a conference on the Philippine island of Cebu.
In India, where output is expected to drop to around 80 million to 82 million tonnes from last year's record 99.2 million, the government's reserves stood at 14.5 million tonnes on October 1, against its usual provision of 5.2 million tonnes.
The nation of 1.2 billion people is likely to consume about 90 million tonnes in 2009/10, leaving a gap of about 8 to 10 million tonnes, most of which could be easily met by surplus stocks, analysts said.
For a graphic of Indian rice production and consumption, click:
PRICE GAP
Besides plentiful stocks, India's domestic rice prices are lower than those overseas, making it tougher for private players to profitably sell at home large volumes bought abroad, although that picture could change if the staple runs short.
Thai 100 percent B grade rice costs $550 a tonne at Indian ports and rice from Vietnam would be $460, both comparing unfavourably with India's domestic price of $275 a tonne.
Some traders added that Indian private traders were unlikely to jump in to seal deals immediately, or at least until the government issued clear guidelines on imports and distribution.
Two government sources told Reuters on Friday India's state trading firms were likely to import 30,000 tonnes of rice and the government was expected to finalise import guidelines soon.
If India imports rice, it will mainly go to build reserves and not meet immediate market needs. This was underscored by Trade Minister Anand Sharma on Thursday, when he said the country had sufficient stocks and would import only to bolster its buffer stocks.
"Whatever is required, we will do it, but we are assured of adequate availability of our stocks," Sharma told Reuters at a conference in Cairo. "If we need anything, it will only be to add to the buffers. We have enough rice, enough wheat, to feed our people."
In addition to expectations of Indian purchases, Manila kicked off its 2010 rice-buying programme two months earlier than usual, with a tender to buy 250,000 tonnes next week.
The prospect of India turning into a buyer, coupled with demand from the Philippines and other importers, could push the price of actively traded 5 percent broken grade rice to more than $600 a tonne, versus around $440-$490 now, Papanos said.
"The Philippines and India, definitely these are the two drivers of the market right now," said Samarendu Mohanty, a senior economist at the International Rice Research Institute, based in Manila.
Still, abundant world supplies and hopes of bumper crops overhang the market, said analysts, adding that Thailand, the world's top exporter, is sitting on a stockpile of some 8 million tonnes.
"China is going to bring in a record crop, the U.S. has a very very good crop this year," said IGC's Cooper. "There are ample supplies and crops are looking good."
For its part the Indian government is trying to ensure that the domestic market is well supplied. A government source in New Delhi said the decision to remove import duty intended to signal the government's resolve to rein in domestic prices.
The government has also announced that farmers will be paid a bonus of 50 rupees per 100 kg of rice bought by government agencies, which could spur higher procurement by the state-run food companies.
The government firms have bought 7.7 million tonnes of rice from farmers between October 1 and 29, up more than 2 percent from last year's 7.5 million tonnes, media reports say.
On top of that, India's food demand is highly price elastic, and many people simply switch to cheaper grains if the price of the staple rises.
In the crop year 2002/2003, for example, India's rice production slid by around 20 million tonnes to 72.7 million tonnes, but imports were negligible as the country dug into its buffer stocks and consumed more wheat.
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