World Rice Price Increased As Supply Shrinks

Rice a staple food in Asian households has its price increased nearly fifty percent since the start of, 2008.

The crisis is anticipated to deepen with prices rising further in the second quarter as key producers put export curbs in place even as imports scramble to secure near term supply.

The shortage and high price of rice may force governments in countries such as China, India, Bangladesh, Indonesia and the Philippines to take even tougher policy measures to contain rising food price led inflation.

Thailand is the biggest rice exporter in the world and is currently the only significant one left in the market after most others have banned or scaled down exports. India may not export much rice this quarter as the government earlier this week banned white rice exports although it continues to allow limited exports of the very highly priced aromatic basmati rice.

Cambodia has banned exports for two months to stabilize prices in the domestic market while Egypt has suspended exports for six months until October. China too, is not expected to have much to export this year, as the country struggles to keep domestic prices in check.

Vietnam another key grain exporter, has said it wants to cap export at four million tons this year, down from an earlier target of four and one half million.

Although Thailand has so far not restricted sales, traders said the country is unlikely to export more than eight and one fourth million tons of rice this year, down eight and one half percent on year, as high domestic prices may force the government to step in to limit exports.

In mid March, the Philippines bought 335,000 tons of mostly twenty five percent broken rice, mainly from Vietnam , at an average price of US$ 700/ton, cost and freight basis about fifty percent higher from contracts signed in late January.

Bangladesh crop was devastated by a cyclone last year and the country has strucked a government to government deal with India to buy up to 400,000 tons of rice at US$ 430/ton, a special concession offered by India. Malaysia imports 70 % of the rice it consumes. Both Malaysia and Bangladesh are looking to source more rice from an already tight market.

Global rice production is expected to lag demand by around 2 million tons in 2007-08 marketing year ending September 30, according to the UN’s Food Agricultural Organization. This is happening at a time when global stock levels, have been steadily declining in recent years.

According to FAO, rice stacks fell to 103.6 million tons in 2006 – 07 from 104.6 million tons in the previous year and could fall by another 1.2 million tons to 102.4 million in 2007 – 08 while production is expected to increase 0.5 percent in 2007 – 08 to 430.4million tons, largely on account of increasing populations.

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