Declining demand lops off rice prices

Slow demand has lopped $100 off Asian rice prices from last year's peak, returning them to levels last seen in 2008, but a further drop could revive the appetite of key buyers, including Africa and the Middle East. The benchmark price has fallen steadily after the Philippines, the world's biggest buyer, tied up most of its 2010 needs late last year, while the chances of India going to the market are slim, given its bulging stocks. Stocks of nearly 27 million tonnes in India could push the world's second-biggest producer to lift a ban on exports of common rice grades that dates to October 2007. "Prices are dropping now and buyers are just in a wait-and-see mode," said Mr Cao Thi Ngoc Hoa, vice general director at Vinafood 2, Vietnam's largest rice exporter. "There's demand from Africa and the Middle East but they're probably waiting for the price drop to stop before they buy." Benchmark Thai rice has fallen from a December 2009 peak of $630 a tonne, hit during a series of Philippine tenders, to $530 a tonne, its lowest this year. Top exporters Thailand and Vietnam, which are struggling to sell huge stocks of the Asian staple, have decided to halt sales for a few months during their harvests, hoping a short-term supply squeeze will support prices. While off from their peak, benchmark Thai rice prices are still easily double those of five years ago, as demand rises in step with a growing global population of 6.8 billion, nearly half of whom eat the grain as a staple. Prices were below $400 in 2008, before a crisis trebled prices to a lifetime high of $1,080 that April, as buyers led by the Philippines scrambled to secure supplies and major exporters curbed sales. This year, Africa, a key market for Thailand, has largely skipped purchases, with higher production allowing countries there to wait for a further price drop before they decide to buy. “Africa has been a regular buyer of Asian rice, but has always been a price-conscious market. The last surge in prices due to the Philippines' massive buying spree has adversely affected African demand," said Mr Shahzad Naqi, chief executive of Pakistani rice exporter Peak Holding. Mr Naqi said a further price drop may whet the appetite of African countries as well as Bangladesh and the Philippines, which could delay additional imports until after a national election in May, unless the El Nino weather condition worsens. The Philippines' 2010 imports, already at a record 2.45 million tonnes, may top three million as its plugs a production gap caused by El Nino. The long hot season caused by the El Nino weather anomaly is estimated to knock 10 percent off Thailand's main crop and around five per cent off the Philippines' annual output, totalling more than three million tonnes of paddy. The impact of El Nino on Vietnam was expected to be moderate. But the additional purchases are much less than the combined 16 million tonnes Vietnam and Thailand hope to sell this year. "If there's no new demand coming, Thai rice could come down to below $500, probably $480," said Mr Chookiat Ophaswongse, president of the Thai Rice Exporters' Association. Outside Asia, El Nino is also affecting planting in the United States and South America, including major producer Brazil. "Normally, we are planting rice in Texas and South Louisiana but the weather is too wet and the temperatures too low and so some farmers are two weeks behind," said Mr Dwight Roberts, president of the US Rice Producers' Association. The El Nino weather phenomenon should fade by early summer in the northern hemisphere but there is a chance La Nina conditions will develop later in the year. The opposite of El Nino, La Nina cools Pacific Ocean waters and could bring storms that may hurt Asia's rice production.