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Tuesday 18 October 2011

Asia flood impact on rice supply, prices in focus

Flood in Thailand.

October 18, 2011
By Ho Binh Minh
Kipp Report and Reuters

Tightening rice supply in top exporter Thailand due to floods and defaults by Vietnam as prices jump could prompt Indonesia, Africa and the Middle East to delay imports until the market steadies or seek cheaper options from India and Pakistan.

International traders and government officials meeting in Vietnam this week will also assess the full impact of flooding on output in the top two exporters, whether prices will escalate further and the demand outlook for typhoon-hit Philippines.

Thai and Vietnamese rice rose after the Thai government began buying paddy from farmers on Oct. 7 at 15,000 baht ($483) a tonne, nearly double local prices in June, and export rates climbed further as Thailand’s worst floods in 50 years inundated farms and mills.

Thai benchmark 100 percent B grade white rice hit $680 a tonne, while Vietnam’s 5 percent broken rice rose to $590 a tonne, the highest in more than three years.

“Vietnamese rice prices will be stable at the current level till the year-end as stocks are low,” said Nguyen Trung Kien, deputy chairman of the Vietnam Food Association

Thai benchmark prices could be pushed to around $850, exporters said, but traders and analysts did not expect levels to soar above $800 immediately, as some exporters would offer rice from their stocks at lower levels.

A jump in the price of rice, a staple for half the world’s population, could be inflationary across parts of Asia and squeeze the budgets of millions living near the poverty line, even though world food prices have been easing on increased supplies of wheat and corn.

Low stocks in Vietnam after a major crop harvest had ended, and the worst flooding in more than a decade in the Mekong Delta that paralysed transportation, would prop up prices at relatively high levels through the year-end.

“How floods are affecting production in Thailand and Vietnam is now of interest,” a trader in Ho Chi Minh City said.

Thailand had to delay rice shipments by a few weeks as floods disrupted logistic systems, said the Rice Exporters Association, which expected rice crop damage of around 4 million tonnes, compared with the commerce ministry’s estimate of 6-7 million tonnes.

But prices in Vietnam eased this week, with the 5 percent broken grain down to $580-$585 a tonne, free-on-board, on thin buying demand, though traders said low stocks will prevent further falls.

Supplies will pick up from next February when harvesting of the winter-spring crop starts, said VFA’s Kien.

The association, which also expected Vietnamese prices to stay firm into first-quarter 2012, has projected the country to ship up to 1.2 million tonnes in the final quarter ended December. This is down a fifth from the year-ago period, reflecting thin import demand as buyers stood back during the price hike.

FLOODS, BUYING DEMAND

Another trader said part of Vietnam’s rice output could be disrupted by the floods, after the country has been expected to default on half a million tonnes as prices climb.

“From the air, we cannot see any rice fields in Vietnam and Cambodia, only waters,” he said after a flight to Cambodia from Ho Chi Minh City over the Delta, Vietnam’s rice bowl.

In the Philippines, a major rice buyer, unmilled rice damaged by two recent typhoons has climbed to about 1 million tonnes, a senior agriculture official said.

President Benigno Aquino said the Philippines does not need to import more rice for this year, while its agriculture department wanted to verify the damages and Manila has said it was reviewing the lower import targets for 2012.

Importers are seeking South Asian rice, with Malaysia saying it will source from India and Pakistan after floods damaged Thai supplies.

“Companies are happily taking rice from Pakistan and India now, so they can return to Thailand and Vietnam after deliveries are completed,” another Ho Chi Minh City-based trader said, without giving details on volumes .

Indonesia is waiting for prices to fall while taking Indian rice after having cancelled a tender for 100,000 tonnes of Thai or Vietnamese rice, the first trader said. Jakarta has been seeking South Asian rice after the reported cancellation of a proposed sale of 300,000 tonnes of Thai rice.

The world’s No.2 rice producer India eased curbs on exports last month and is set to harvest at least 87 million tonnes of summer-sown rice, adding to existing stocks of 22.7 million tonnes.

Traders estimate 1.0-1.5 million tonnes of Indian rice have been contracted for exports after the government freed overseas sale, with 700,000 tonnes to be shipped by December to destinations such as Bangladesh, Nigeria and South Africa.

“Indonesia and the Philippines both have demand to buy, only now they are waiting for prices to ease,” the trader said. “Their import could start in December, now all are looking at the floods.” (Editing by Ramthan Hussain)

1 comment:

Anonymous said...

Cambodia government need to invest in building large dikes and canals to control the flood water. The flood water can be stored and months later can be use for farming in the summer time when there is drought. Our ancestor had built a huge Baray adjacent the airport in Siemreap. This is the reason why they built it. There were flood back then, they were able to control it.