By Luzi Ann Javier & Supunnabul Suwannakij - Mar 5, 2013
Bloomberg
Farmers are preparing to plant a record rice crop that will boost inventories held by the world’s biggest exporters to the highest ever.
Harvests will climb 1.2 percent to 472 million metric tons as the five largest shippers hoard 38 million tons, or a year of global imports, International Grains Council data show. Thailand may run out of warehouse space as reserves jump 40 percent to a record 18.2 million tons, according to the United Nations.
Prices in Vietnam, an Asian benchmark, will drop 6.6 percent by December to $377.50 a ton, the lowest level since 2010, based on the median of 10 trader estimates compiled by Bloomberg.
Global food supplies are rising as the worst U.S. drought since the 1930s abates and the U.S. Department of Agriculture predicts record corn and soybean harvests. Expanding stockpiles may help contain world food costs that have tumbled 12 percent from an all-time high in 2011. Production of rice, the staple for half the world, is set to climb to an all-time high for a fourth season in 2013-2014 while inventories in Thailand have almost doubled in three years, IGC data show.
“The price outlook in the long run looks rather bleak,” said Jac Luyendijk, chief executive officer at Swiss Agri Trading SA, which handles about 600,000 tons a year. “We have to keep in mind that with these increasing rice stocks in Thailand, the problem will become bigger and bigger. Once Thailand unloads its stockpiles, we will look to very depressed rice prices for the years to come.”
Government Buying
In Vietnam, supplier of 20 percent of global exports, 5 percent broken white rice has fallen 9.4 percent to $404 in the past year, UN data show. The Standard & Poor’s GSCI Agriculture Index (MXWD) of eight commodities lost 1 percent, while the MSCI All- Country World Index of equities advanced 7.5 percent.
Treasuries returned 2.1 percent, a Bank of America Corp. index showed.
Global inventories are already rising 7 percent to a record 171 million tons in 2012-2013 as supply beats consumption for an eighth season, according to the UN Food & Agriculture Organization. Governments from China to Thailand are buying from farmers at above-market rates, boosting harvests, the FAO says.
“Production could well surpass the 2012 record and even outpace consumption,” said Concepcion Calpe, the secretary of the FAO’s inter-governmental rice group, who has tracked the market since 1998. Harvests contracted only once in the past decade, she said by e-mail.
Yingluck’s Pledge
Stockpiles in Thailand, set to become the biggest exporter this year, jumped after Prime Minister Yingluck Shinawatra started buying from farmers in 2011, fulfilling an election pledge to boost rural incomes. The program may cost as much as 440 billion baht ($14.8 billion) this season compared with 376 billion baht, or about 3.4 percent of gross domestic product, a year earlier, the World Bank estimates.
“Thailand will have to get rid of the surplus in the next few months to be able to continue the program and purchase rice again,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute, a group based in the Philippines. “Thailand cannot continue to hold these stocks for a long time due to quality issues and also the space.”
The country is seeking to reduce reserves by selling 7 million tons to foreign governments including China, Permanent Secretary for Commerce Vatchari Vimooktayon said in January.
The government may also build more warehouses and increase borrowing to sustain its program without being forced to reduce rates to match competitors’ prices, said Kiattisak Kanlayasirivat, a Bangkok-based director with Novel Commodities SA, which trades about $600 million of rice a year.
China, India
In the U.S., the fifth-biggest exporter, farmers will sow 2 percent less as they shift to more profitable crops, the USDA said Feb. 22. Rough-rice futures traded in Chicago climbed 8.6 percent in the past year, helped by purchases of higher quality grain by the European Union and Africa. U.S. export sales rose to 2.42 million tons as of Feb. 21 from 2.09 million tons a year earlier, government data show. Domestic inventories will fall to the lowest level in five years, the USDA says.
China, the top consumer, may increase imports because foreign rice is cheaper than the home-grown variety, the state- owned China National Grain & Oils Information Center said Feb. 1. Purchases rose fourfold to 2.4 million tons last year from about 600,000 tons in 2011, customs data show. Shipments from India, the largest supplier in 2012, will drop 18 percent to 7.5 million tons this year, the FAO said.
Demand elsewhere is declining. Purchases by Nigeria, the world’s biggest importer, will drop to 2.9 million tons in 2012- 2013 from a record 3.2 million tons a year earlier, USDA data show. In the Philippines, the largest buyer until 2010, the crop may exceed consumption and spur exports by the end of the year, President Benigno Aquino said Jan. 25.
“There’s just too much supply in the market and I don’t see any buyers around except China,” said Rakesh Singh, a New Delhi-based trader at Emmsons International Ltd., who has traded the grain since 1993. “Global producers, except India, are looking at a bumper crop and that’s pressuring prices.”
Bloomberg
Farmers are preparing to plant a record rice crop that will boost inventories held by the world’s biggest exporters to the highest ever.
Harvests will climb 1.2 percent to 472 million metric tons as the five largest shippers hoard 38 million tons, or a year of global imports, International Grains Council data show. Thailand may run out of warehouse space as reserves jump 40 percent to a record 18.2 million tons, according to the United Nations.
Prices in Vietnam, an Asian benchmark, will drop 6.6 percent by December to $377.50 a ton, the lowest level since 2010, based on the median of 10 trader estimates compiled by Bloomberg.
Global food supplies are rising as the worst U.S. drought since the 1930s abates and the U.S. Department of Agriculture predicts record corn and soybean harvests. Expanding stockpiles may help contain world food costs that have tumbled 12 percent from an all-time high in 2011. Production of rice, the staple for half the world, is set to climb to an all-time high for a fourth season in 2013-2014 while inventories in Thailand have almost doubled in three years, IGC data show.
“The price outlook in the long run looks rather bleak,” said Jac Luyendijk, chief executive officer at Swiss Agri Trading SA, which handles about 600,000 tons a year. “We have to keep in mind that with these increasing rice stocks in Thailand, the problem will become bigger and bigger. Once Thailand unloads its stockpiles, we will look to very depressed rice prices for the years to come.”
Government Buying
In Vietnam, supplier of 20 percent of global exports, 5 percent broken white rice has fallen 9.4 percent to $404 in the past year, UN data show. The Standard & Poor’s GSCI Agriculture Index (MXWD) of eight commodities lost 1 percent, while the MSCI All- Country World Index of equities advanced 7.5 percent.
Treasuries returned 2.1 percent, a Bank of America Corp. index showed.
Global inventories are already rising 7 percent to a record 171 million tons in 2012-2013 as supply beats consumption for an eighth season, according to the UN Food & Agriculture Organization. Governments from China to Thailand are buying from farmers at above-market rates, boosting harvests, the FAO says.
“Production could well surpass the 2012 record and even outpace consumption,” said Concepcion Calpe, the secretary of the FAO’s inter-governmental rice group, who has tracked the market since 1998. Harvests contracted only once in the past decade, she said by e-mail.
Yingluck’s Pledge
Stockpiles in Thailand, set to become the biggest exporter this year, jumped after Prime Minister Yingluck Shinawatra started buying from farmers in 2011, fulfilling an election pledge to boost rural incomes. The program may cost as much as 440 billion baht ($14.8 billion) this season compared with 376 billion baht, or about 3.4 percent of gross domestic product, a year earlier, the World Bank estimates.
“Thailand will have to get rid of the surplus in the next few months to be able to continue the program and purchase rice again,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute, a group based in the Philippines. “Thailand cannot continue to hold these stocks for a long time due to quality issues and also the space.”
The country is seeking to reduce reserves by selling 7 million tons to foreign governments including China, Permanent Secretary for Commerce Vatchari Vimooktayon said in January.
The government may also build more warehouses and increase borrowing to sustain its program without being forced to reduce rates to match competitors’ prices, said Kiattisak Kanlayasirivat, a Bangkok-based director with Novel Commodities SA, which trades about $600 million of rice a year.
China, India
In the U.S., the fifth-biggest exporter, farmers will sow 2 percent less as they shift to more profitable crops, the USDA said Feb. 22. Rough-rice futures traded in Chicago climbed 8.6 percent in the past year, helped by purchases of higher quality grain by the European Union and Africa. U.S. export sales rose to 2.42 million tons as of Feb. 21 from 2.09 million tons a year earlier, government data show. Domestic inventories will fall to the lowest level in five years, the USDA says.
China, the top consumer, may increase imports because foreign rice is cheaper than the home-grown variety, the state- owned China National Grain & Oils Information Center said Feb. 1. Purchases rose fourfold to 2.4 million tons last year from about 600,000 tons in 2011, customs data show. Shipments from India, the largest supplier in 2012, will drop 18 percent to 7.5 million tons this year, the FAO said.
Demand elsewhere is declining. Purchases by Nigeria, the world’s biggest importer, will drop to 2.9 million tons in 2012- 2013 from a record 3.2 million tons a year earlier, USDA data show. In the Philippines, the largest buyer until 2010, the crop may exceed consumption and spur exports by the end of the year, President Benigno Aquino said Jan. 25.
“There’s just too much supply in the market and I don’t see any buyers around except China,” said Rakesh Singh, a New Delhi-based trader at Emmsons International Ltd., who has traded the grain since 1993. “Global producers, except India, are looking at a bumper crop and that’s pressuring prices.”
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