Thai Rice Output May Drop on Drought as El Nino Parches Region

Rice production in Thailand, the world’s largest exporter, may decline as drier-than-normal weather curbs yields, adding to signs that an El Nino may be hurting farm output across the region. “Unmilled rice output in the next crop year may fall below the average production level of 31 million tons if El Nino puts off rainfall,” Prasert Gosalvitra, head of the nation’s Rice Department, said today by phone from Bangkok. Thailand accounts for about a third of the global trade in rice. Lower production of rice from Thailand and palm oil from Malaysia caused by the dry weather may drive commodity prices higher, spurring food inflation. Asian agricultural companies including Wilmar International Ltd. may benefit from the surge, BNP Paribas SA told investors in a note today. “We’re worried that delayed rainfall will probably hurt output,” Apichart Jongskul, secretary-general of Thailand’s Office of Agricultural Economics, said today by phone. “The impact on the next crop has yet to be evaluated,” Apichart said. Thai output of unmilled rice in the year that started Oct. 1 may be between 27 million and 29 million tons, said Apichart. That’s unchanged from a forecast on Jan. 13, and 15 percent lower than the previous year’s 31.7 million tons, he said. The El Nino weather phenomenon, characterized by warmer sea-surface temperatures across the equatorial Pacific, can cut rainfall in Asia. Among the expected impacts from this month to May are drier-than-average conditions over Indonesia, according to a March 4 report from the U.S. Climate Prediction Center. ‘Driest Period’ “It’s the driest period I’ve ever seen,” Virapan Tipsuna, a 42-year-old farmer in Thailand’s northeastern province of Nongkhai, said yesterday in an interview. “It is so dry that the water supply is not enough for rice farming.” Palm oil, about 90 percent of which is produced in Indonesia and Malaysia, may surge this year as the El Nino curbs yields, analysts and traders including Prudential Bache Commodities LLC and Godrej International Ltd. warned this week. The commodity, trading today at 2,700 ringgit ($813) a ton, may jump to 3,200 ringgit, Godrej’s Dorab Mistry forecast. “Mistry’s expectations are similar to our own thesis of an extended El Nino and lower” palm oil production, BNP’s Michael Greenall wrote in today’s note, including among his top picks Indonesia’s PT Astra Agro Lestari, that country’s largest publicly traded plantations company. Astra Agro stock has almost doubled in the past year. Drought Spreads Drought is spreading in 36 of Thailand’s 76 provinces, mostly in the North and Northeast, which are major planting areas of rice and sugar, according to a statement on the government’s Web site. Water in reservoirs that can be consumed has dropped 15 percent this year, according to the Royal Irrigation Department. The Mekong River, which flows from China through five countries in Southeast Asia, is at its lowest level in 30 years near Thailand’s border with Laos, Thailand’s Department of Water Resources said yesterday. A drought in southern China, including Yunnan province, has left rivers at record lows, the Ministry of Water Resources said yesterday. Dry weather from El Nino has damaged 200,000 tons of rice in the Philippines, the world’s largest importer, Agriculture Secretary Bernie Fondevilla said on the same day. In Thailand’s Northeast, the water shortage, coupled with plant infestations, has damaged half of the rice crop, said Virapan, the farmer. “We just hope that it will rain soon and we don’t have to suffer again next year.”