Thailand Rice prices pick up as demand improves

* Rice prices are expected to rise by 6% to 7% this month or early next amid a resumption in foreign demand ahead of year-end festivals and lower supply due to climate change. Foreign purchase orders have already resumed, and a flood of orders is anticipated next month to serve the many year-end festivals, said Sumeth Laomoraphorn, the chief operating officer of CP Intertrade. More purchase orders from African markets are also likely after Ramadan. Mr Sumeth said other supporting factors were the impact from global warming and widespread drought that has led Russia to ban wheat exports. Hot, dry weather is also expected to cut the output and export capacity of Ukraine and other European nations. In addition, Mr Sumeth said lower output in Latin American countries, particularly Brazil, due to climate change is also expected to prompt them to increase their rice imports. "The Philippines, which is the world's leading rice importer, is also now facing inadequate rice production and will have to import as much as two million tonnes this year," he said. "If Vietnam, which has already secured massive advance purchase orders, fails to deliver on its commitments, opportunity will return to our grains." Vietnam expects to export 6.5 million tonnes of rice this year, 4 million of which have already been exported. Mr Sumeth said Vietnam's 2% depreciation of the dong last week was unlikely to improve the rice industry's export competitiveness very much. The currency devaluation would instead drive up inflation and interest rates, consequently raising production costs for Vietnamese producers, he said. "Prices for Thai rice have bottomed out and are now starting to improve due largely to shrinking world rice stocks after traders delayed their purchases over the past four or five months," said Mr Sumeth. "The second half will represent an opportunity for Thai rice exports, which are expected to reach 8.5-9 million tonnes." Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, also agreed the outlook was promising for Thai rice in the second half, particularly with several rice-producing countries such as Pakistan, the world's third-largest rice exporter, suffering from floods and other disasters. He said parboiled rice shipments would especially benefit from India's continued ban on non-basmati exports. Thai rice prices, the benchmark for Asia, climbed to their highest level in two months last week as delayed planting has reduced supply. The Thai Rice Exporters Association increased the price of 100% grade-B white rice by 3.7% from a week earlier to $479 a tonne, while 25% broken rice rose 3.2% to $423 a tonne. Thailand this year had exported 4.9 million tonnes of rice as of Aug 18, down by 8.65% year-on-year, for a value of $2.93 billion, down 5.17%. The global rice trade is estimated at 30 million tonnes of milled rice for the 2009-10 season, a slight increase of 2.6% from the previous season.