“Globally, the market fundamentals are still relatively sound,” said Eric Wailes, a professor at the University of Arkansas, in an interview today. “I would be surprised if we hit the kind of prices that we had in the spring of 2008.”
Rice stockpiles in Thailand were forecast by the U.S. Department of Agriculture in October at 3.5 million metric tons for the 2009-2010 marketing year, up from 2.5 million tons in 2006-2007, before prices surged. Inventory in Vietnam will be 1.7 million tons, from 1.4 million tons in 2007, the USDA said.
“That didn’t exist going into the spring of 2008” when prices reached a record, said Wailes, who co-wrote a 1998 study that predicted rice demand would exceed output in 2009-2010, which the UN Food and Agriculture Organization and the USDA forecast this year.
Food price protests swept the globe last year after fears of shortages prompted producers including India to cut rice exports and importers increased purchases. Futures traded in Chicago surged to a record $25.07 per 100 pounds in April 2008.
Rice futures have gained about 14 percent in the past month as drought-hit India, the second-largest grower, returns to the import market for the first time since 2005-2006, and storms destroyed 1 million tons of output in the Philippines, the biggest importer.
Rice for January delivery fell for the first time in six days, dropping 0.5 percent to $14.98 per 100 pounds in after- hours electronic trading on the Chicago Board of Trade as of 12:23 p.m. Singapore time.
Rice Panic
India may buy as much as 3 million tons next year and become a net importer for the first time in 21 years, potentially fueling the kind of “panic” that sent prices to records, Samarendu Mohanty, a senior economist at the International Rice Research Institute, said Oct. 28.
Arthur Yap, Philippine Agriculture Secretary, predicted last week that prices would return to records, while Dwight Roberts, president of the U.S. Rice Producers Association, said the global market was “on thin ice.”
“I’m a little concerned that fanning the flames of speculative pricing on rice may be premature,” Wailes said over the phone. “There is certainly speculative demand out there. Rice is a very vulnerable commodity because there’s such a small percent of it that’s traded and so much of it is very concentrated in the hands of very few traders,” he said.
Indian Imports
India’s rice inventory, estimated by the FAO at 21 million tons at the end of the 2008-2009 marketing year, may prevent the South Asian nation from importing as much as 3 million tons, even as output declines, Wailes said.
“I’d be surprised if they do that,” he said. India’s next rice crop may narrow its production shortfall, limiting imports, he added.
India may buy 250,000 tons in a tender this month to boost stockpiles after drought parched crops, Rakesh Singh, a trader at New Delhi-based Emmsons International Ltd. who predicted last week that India would return to the import market, said today.
State-owned companies are seeking up to 30,000 tons of rice for delivery in the next two months, a government official said Oct. 30, three days after Farm Secretary T. Nanda Kumar said the country had no plans to import grain.
Recent gains in prices may also trigger a supply response from producers including Pakistan and the U.S., Wailes said.
“You would expect that with these kinds of market price signals that there is certainly potential to see more acreage and higher input used particularly in irrigated rice areas, higher levels of fertilizer,” he said. “There will be a supply response into the next spring of 2010.”
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