Rice tumbles as Cambodia lifts ban on exports

By Moming Zhou,
MarketWatch

SAN FRANCISCO (MarketWatch) -- Rice futures slumped by their daily limit of 50 cents for a second day on Tuesday after Cambodia, one of the world's top 10 rice exporters, said it will lift restrictions on exports.

Cambodia will resume rice exports Tuesday after a temporary two-month ban, the country's Prime Minister Hun Sen announced on Monday, according to the Associated Press. Rice futures trading on the Chicago Board of Trade tumbled 50 cents to below $20 per 100 pounds.

Futures prices also slumped by 50 cents on Friday. Trading was closed on Monday in observation of Memorial Day.

Cambodia's move, however, may have a limited effect on the long-term world rice market, according to a U.N. rice expert, because the ban had already been somewhat lifted.

Cambodia has limited milling facilities, said Concepcion Calpe at the U.N.'s Food and Agriculture Organization in Rome. The country has to export rice to two neighboring countries, Thailand and Vietnam, to get milled. Cambodian rice will then be re-exported from these two countries.

"They had lifted bans in a number of neighboring provinces along the boarder," said Calpe. Officially ending the ban will "make things a little easier, but there won't be much difference because rice has already been flowing through the boarder."

Export restrictions

Rice futures have almost doubled this year, touching a record high of $24.46 per 100 pounds in April, despite estimates that the world rice production is to hit a record high in the next crop season. The culprit is export restrictions among leading rice producers, analysts said.

India, the third largest exporter of the grain, banned the export of non-basmati rice in March. Commerce Secretary Gopal Pillai on Tuesday said that the country won't follow Cambodia and ease curbs on export restriction, Reuters reported.

India's "export restrictions spread to other suppliers and lead to urgent efforts by rice importing countries to secure supplies -- at any price -- in a thin global market," said Tom Slayton, an economist at Center for Global Development, a Washington-based nongovernmental organization, in a note.

Vietnam, the world's second-largest rice exporter, reportedly may lift restrictions on rice exports in July. But the country lowered this year's export target to between 3.5 million and 4 million tons from last year's 4.5 million tons.

Other countries such as Argentina, Russia, Ukraine and Kazakhstan have also placed additional taxes or restrictions on exports of grains, rice and other products.

Export restrictions in some countries were driven by political reasons, Slayton said. India is facing a parliamentary election in May 2009 and "the government does not want to face further criticism."

To secure grain supplies, consuming countries have been encouraging imports by reducing or eliminating tariffs. Mexico on Sunday eliminated import tariffs on staples including corn, rice and wheat, according to Reuters.

Moming Zhou is a MarketWatch reporter, based in San Francisco.