Another record Indian rice crop may add to world glut
Rice exports from India, the world's second-largest grower, are poised to reach a record for a second year as the harvest may rebound on normal monsoon rain, potentially widening a global surplus.
Shipments will climb 5 per cent to 10.5 million tonnes in the year beginning April, according to estimates compiled by Bloomberg.
Output may jump to a record high of 110 million tonnes in the season beginning July, according to Vijay Setia, a former president of the All India Rice Exporters Association.
Surging exports from India may add to global food supplies as farmers from Vietnam to China are preparing to plant a record rice crop. Stockpiles in Thailand have surged to a record high as the government buys supplies from farmers, while exports from Myanmar and Cambodia have expanded.
The glut may further curb world food costs, which tumbled for five straight months to February.
"Prices may be depressed if Thailand starts putting a lot of supply in the market and India continues its exports," said Concepcion Calpe, the secretary of the United Nations' Food & Agriculture Organisation's inter-governmental rice group, who has tracked the market since 1998. "Vietnam has a lot of supplies and Myanmar is also trying to gain more markets."
Global production of rice, the staple for half the world, will climb 1.2 per cent to 472 million tonnes next year, while stockpiles in the five largest shippers are estimated at 38 million tonnes, equal to one year of imports, according to International Grains Council data.
World inventories are forecast at a record 171 million tonnes in 2012-13 as supply exceeds consumption for an eighth season, according to the FAO.
The monsoon, which accounts for more than 70 per cent of India's annual rainfall, will be normal in 2013 for the third time in four years and chances of a drought are only 4 per cent, according to Jatin Singh, chief executive of Skymet Weather Services, who correctly predicted a drought in 2009. That may boost rice planting.
"There is no reason why we cannot boost exports next year when the monsoon will be normal," Setia said. Shipments reached a record even after a drought cut output in 2012-13, he said.
Stockpiles in Thailand jumped after Prime Minister Yingluck Shinawatra started buying from farmers in 2011, fulfilling an election pledge to boost rural incomes. The country may run out of warehouse space as reserves jump 40 per cent to a record 18.2 million tonnes, according to the United Nations.
Prices in Vietnam, an Asian benchmark, will drop 6.6 per cent by December to $US377.50 a tonne, the lowest since 2010, based on the median of 10 trader estimates.
"If prices fall, the African countries and the Near East markets will benefit and it could even be that there will be increased flow of Asian rice into Latin America," Calpe said.
India is exporting rice mainly to Africa and Bangladesh at about $US395 a tonne, while premium basmati rice is sold at about $US990 a tonne to the Middle East, Iran and Europe, according to government data. Basmati exports account for about 25 per cent of total sales, the data showed.
India's exports will depend on monsoon and domestic requirement to run a food security bill, said Samarendu Mohanty, a senior economist at the Philippines-based International Rice Research Institute. Any decline in shipments from India will be met by increased sales from Thailand, which will nullify the impact on prices, he said.
The Indian government will need 61.2 million tonnes of grains to implement the bill, which seeks to guarantee five kilograms of grain a month a person.