High Global Demand, Tight Supply To Boost Rice Prices

Rising demand at a time when actual production may
register a slight decline will likely boost global rice prices over the next
few years, industry executives said over the weekend.
 
  This could mean producers such as Thailand and Vietnam may enjoy  more
bargaining power in rice trade negotiations than in previous years when prices
were mostly dictated by the buyers.
 
  "The 2007 outlook suggests it will be a sellers market," said Chookiat
Ophaswongse, president of the Thai Rice Exporters Association.
 
  Chookiat said the just-concluded Thailand Rice Convention 2007  has drawn
more purchase orders from foreign buyers and will help Thailand, the world's
largest rice exporter, to reach the export target of 8.5 million to 9 million
tons in 2007, up from 7.5 million tons in 2006.
 
  "I'm optimistic about this year's exports due to high demand, as global rice
output is expected to fall," Chookiat said.
 
  According to United Nations' Food and Agriculture Organization, global rice
consumption is estimated to reach 418 million metric tons in 2007, up from 414
million tons in 2006. While, rice production globally is projected at 415
million metric tons this year, down from 418 million tons last year.
 
  According to FAO estimates, global rice trade is expected to reach 29.8
million tons in 2007, up from 28.3 million tons in 2006.
 
  Speaking at the industry gathering, Chookiat said some rice producing
countries such as Indonesia and the Philippines may face shortages this year
because of lower domestic productivity and may need to import more of the
grain.
 
  "Thailand is well-placed to meet (this) higher rice demand given the sheer
size of (its) existing (domestic) rice stocks," Chookiat said.
 
  Currently, the country has 4.29 million metric tons of rice left over in
stocks from the 2006-07 crop year ending October, compared with 3.76 million
tons at the same time last year.
 
 
   Demand Seen Rising As Population, Economies Grow
 
 
  According to speakers at the conference, there will be a rise in demand for
grains including rice in most markets as populations grow  along with a general
improvement in purchasing power, brought about by steady economic growth.
 
  Indonesia plans to import about 2.2 million tons of rice in 2007, sharply
higher than the 600,000 tons it bought in 2006, an official who attended the
conference said.
 
  "Indonesia's rice imports will rise this year, as production may fall short
of demand because of El Nino weather conditions hurting the rice crop," said
Ardiansyah Tarman, director-general of the domestic trade department in
Indonesia.
 
  Indonesian rice consumption is projected at 33.6 million tons in 2007,
against projected output of 32.2 million, leaving an estimated 1.4 million tons
in deficit, according to data from the country's Ministry of Agriculture.
 
  "We're allowing more rice imports to help curb inflation as our current
domestic prices are so high," Ardiansyah said.
 
  Thailand and Vietnam would be Indonesia's major suppliers, he said.
 
  Indonesia's 100% white rice is currently trading around $500/ton, compared to
the same grade Thai rice currently selling at $325/ton, FOB Bangkok.
 
  Strong economic growth in another importer, China, has caused demand to rise
more rapidly than supply, because growth in per capita income is increasing the
consumption of rice, said Yang Hong, general manager of the Rice Division at
Chinese trading company, COFCO International.
 
  "Chinese consumers are demanding more Thai jasmine rice due to its soft rich
texture, as they now have the ability to pay for it," Yang said. "Import (by
China) of this rice variety has risen by 22% year-on-year in the first three
months."
 
  The steady population growth in Africa and the Middle East is also boosting
demand for rice.
 
  Iran, a key buyer of Tha jasmine rice, has bought 580,000 tons so far this
year, and is negotiating to buy another 300,000 tons. "Iran doesn't want rice
from other origins. It prefers Thai rice for its quality and taste," said
Chookiat.
 
 
   Limited Global Supply To Support Prices
 
 
  Apart from rising global demand, firm rice prices this year could partly be
attributed to Vietnam's stagnating output amid  higher cost of inputs such as
fertilizers, constant environmental changes and frequent natural calamities.
 
  With the government not stepping in to support low income farmers, Vietnamese
production could even decline in the coming years, analysts said.
 
  That is already having an impact on exports fro Vietnam which fell 18.8% on
year to 1.3 million metric tons in the first quarter of this year.
 
  "Limitation of supplies at the beginning of 2007 and a delay in winter-spring
crop harvest led to the country's brief export freeze," said Huynh Minh Hue,
deputy general secretary of the Vietnam Food Association.
 
  Vietnamese rice export prices were 14% higher in the first quarter at an
average of $288/ton, Huynh said.
 
  "We face unfavorable rice export prospects as sale prices are higher due to
an increase in production cost and transportation fees, while farmers' income
remain low in spite of the price increase," Huynh said.
 
  Vietnam is expected to export only 4.5 million metric tons of rice in 2007,
down from 4.7 million tons exported in 2006, Huynh said.
 
  That would be another factor keeping prices higher this year and beyond.
"Prices are expected to remain on a steady and upward trend," Chookiat said.