June 21, 2012

World's Q3 rice prices maybe steady or down

Depending on how Vietnam and India grapple for sales amid huge supplies which may further increase should the Thai government release rice from its stockpiles, world rice prices in the third quarter will probably stay steady or decline, a Thai industry executive said Wednesday (June 20).

Vietnam and India are competing head to head in the global rice market, and prices may fall further as Vietnamese rice exporters cut prices to compete against Indian grades, said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

Vietnamese 5% broken white rice is being quoted around US$410 a tonne on a free-on-board basis, while India rice is offered around US$420/tonne, said Chookiat, who is also managing director of major Thai exporter Huay Chuan Rice Co.

Meanwhile, the Thai government has amassed 15 million tonnes of paddy as part of an on-going procurement programme and will need to sell supplies soon to free up warehouse space for the next harvest. This could push Vietnamese prices to below US$400/tonne by year's end, he added.

Vietnam was the world's second largest rice exporter after Thailand last year and is expected to export 6.5 million-7.0 million tonnes of rice this year, the Vietnam Customs Department said last Thursday (June 14).

According to the International Grains Council, India is expected to export 6.8 million tonnes of rice this marketing year ending September 2012. Thailand may export 6.7 million tonnes, down about 37% from last year, said the IGC in a May report.

The fall in Thai exports is mainly due to the government's election pledge to procure paddy from farmers at THB15,000 (US$474) per tonne, translating to about US$750/tonne on a FOB basis, which also makes Thai rice uncompetitive on the global market. The authorities have announced that the programme will continue into the next harvest, which starts around October.

"Depending on how much stocks the government releases, this could depress global rice prices further, as it's unlikely that buyers will pay a large premium for Thai rice over other grades," added Chookiat.

Spot Thai 5% broken white rice is being offered around US$600/tonne--over 40% higher than Vietnamese and Indian grades, he said.