March 15, 2010

 

Asia Grain Outlook on Monday: El Nino may support rice prices

 

 

Asian rice prices are likely to be steady or slightly higher this week as an El Nino-induced drought is affecting Southeast Asia's spring crop, said analysts and traders.

 

"Prices are likely to be stable at current levels and could even gain from the El Nino," said a Thailand-based exporter.

 

He said along with the El Nino-induced fall in output, prices will also be determined by demand.

 

Traders said apart from the usual rice purchases by Bangladesh and Malaysia and recent sales to the Middle East, most additional demand this year has come from the Philippines.

 

Thai 25% broken white rice is being quoted around US$480 a tonne, free-on-board for early April shipment, while 5% brokens are around US$445/tonne. Thai parboiled rice is offered at US$510/tonne.

 

"The dry season rice harvest in Southeast Asia during April and May is expected to be affected by El Nino, and this can push up prices," Bas Bouman, head of the Crop and Environmental Sciences Division at the International Rice Research Institute, said at an international seminar here last week.

 

Thailand recently decided not to go ahead with a planned sale of rice from its inventories because bids were considered too low.

 

The postponement of the sale indicates the government and traders expect prices to go up again, mainly due to El Nino, Bouman said.

 

The El Nino weather phenomenon is typically associated with above-average sea temperatures and usually, but not always, with below-normal rainfall in many areas of the Asia-Pacific region. Many parts of Southeast Asia are experiencing unusually dry weather due to El Nino, prompting concern that the ongoing harvest and upcoming summer planting of rice may be affected.

 

Close to 30% of rice production in Southeast Asia is from the spring harvest.

 

An El Nino can bring drought to some parts of the world and moisture to others and therefore crop damage can be offset by gains in some regions, said Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains at the United Nations Food and Agriculture Organization.

 

However, he said unlike other crops, an El Nino can be bad for rice because most production is concentrated in Asia.

 

He said there are concerns that if the next rice harvest is less than anticipated, rice prices could go up.

 

A bumper harvest had been expected in Vietnam, but it's now feared that drought and reduced water flow from the Mekong River and Red River will cause significant winter-spring crop losses, said the FAO's senior economist, Concepcion Calpe.

 

Thailand, the world's largest rice exporter, has revised its spring crop estimate sharply lower to 6.0 million tonnes from a December forecast of 8.2 million tonnes, Calpe said.

 

Unlike Thailand, where the spring crop is secondary, in Vietnam, it's the main crop, yielding 18.6 million tonnes last year.

 

Calpe didn't provide any forecast for the crop this year but said that as of Feb. 15, 268,000 hectares were harvested in the Mekong Delta, which is one of the principal producing zones, down from 286,500 hectares in the same period a year earlier.

 

Conclusions can't be drawn from this data, however, as total acreage in Vietnam is 3.0 million hectares, she said.

 

Abbassian said the effect of El Nino on next crop plantings will also depend on its intensity. The prevalent view is that the phenomenon may have already reached its peak and will subside during the May-July period, Calpe added.