May 7, 2008

 

Asia Grain Outlook on Wednesday: Rice May Stay High In Myanmar Aftermath

 

 

Rice prices in Asia are unlikely to fall much in the rest of this week, as the impact of Cyclone Nargis in Myanmar may lead to the country importing rice.

 

The cyclone's impact has been the heaviest in the Irrawaddy river delta, which grows a large part of Myanmar's paddy crop.

 

Before the cyclone hit Myanmar, the country was expected to harvest a bumper rice crop of 32 million metric tonnes in 2008, up 500,000 tonnes from last year, according to a U.N. Food and Agricultural Organization projection in early April.

 

Myanmar was also projected to export up to 500,000 tonnes of rice this year compared with none last year.

 

"While Myanmar's cyclone has undoubtedly caused a humanitarian disaster, it will be supportive for rice prices," said a trader in Bangkok.

 

But physical rice prices in Thailand haven't yet reacted much to the Myanmar cyclone.

 

Chicago Board of Trade rice prices ended sharply higher Tuesday, after posting losses throughout last week.

 

At 0541 GMT, the CBOT July rice contract was trading 45 cents higher from Monday's pit closing, at US$21.55 per 100 pounds.

 

However, CBOT rice futures and Asian physical prices are completely unrelated to each other, and both often chart independent price trends.

 

In other commodities, corn prices are likely to keep rising as wet weather concerns in the U.S. support CBOT corn futures.

 

Additionally, crude oil selling above US$120 a barrel is very supportive for corn prices as it makes corn-based ethanol plants more viable and raises the demand for corn.

 

In other news, China has said it has enough grain stocks to meet domestic demand.

 

Agricultural Minister Sun Zhengcai was quoted in a report Wednesday as saying China's grain reserves are at 150 million-200 million tonnes, with rice stocks of around 40 million-50 million tonnes, sufficient to meet domestic needs.

 

Sun also said the rise in the local prices of agricultural commodities, in contrast to a sharp rise in global food prices, was "reasonable, mild and manageable."