July 15, 2009

Rice prices in Asia may stay firm in coming sessions, led by strong gains on the Chicago Board of Trade in recent sessions following last week's U.S. Department of Agriculture report, and a weak start for the monsoon rains that nourish India's rice crop, market observers said Wednesday.

 

Though rice was moving lower in electronic trading on the e-CBOT Wednesday - at 0730 GMT September rice was trading down 6.50 cents at US$13.04 a hundredweight - CBOT rice has risen steadily since last week's bullish U.S Department of Agriculture, gaining 59.50 U.S. cents in the five sessions to the end of trade Tuesday.

 

The USDA's bullish projection for U.S. ending stocks and the sluggish start to India's monsoon season could push the market higher still in coming sessions, traders said.

 

India's federal government is concerned about the delay in the arrival of annual monsoon rains in some of the country's key agricultural areas, but it is premature to comment on the likely impact of deficient rainfall on economic growth this fiscal year, the deputy chairman of the Planning Commission said Tuesday.

 

"It is a matter of continuing concern. Perhaps in July there will be a recovery in the base of the monsoon," Ahluwalia said.

 

India's annual monsoon rains for the week ended July 8 were 8% below normal, showing an improvement from a deficit of 29% the previous week, the India Meteorological Department said last week.

 

Two Indian states have declared drought in some parts due to scant rainfall during the peak summer crop-planting season, state government officials said yesterday.

 

The eastern state of Jharkhand has declared a drought in four of 24 districts while Manipur in the northeast has declared a drought in the entire state. The main summer-sown crop in both states is rice.

 

However, on a potentially bearish note for the rice market, a senior Thai industry official said Wednesday the government's milled rice stockpile has probably risen to around 7 million tonnes and is likely to start being released back into the market soon.

 

Under a market intervention program in place since March, aimed at securing a fair deal for Thai rice farmers, the Thai government said it would build a 6 million-tonne milled-rice stockpile by buying paddy directly from farmers at a fixed price of US$345/tonne.

 

"I think that level has already been passed - the stockpile is now likely nearing 7 million tonnes," said Chookiat Ophaswongse, president of the Rice Exporters Association of Thailand.

 

"It remains unclear when the government will start to release it but it will have to soon - before the main harvest gets underway in November," he said.

 

While the scheme has helped the country's rice farmers, exporters say it places the country's rice export sector in the hands of the government, leaving the private sector at the mercy of government-dictated prices and supply.

 

Meanwhile, observers have expressed concern that the huge stockpile could hang over the market going forward.

 

"How and when the government decides to release the stockpile is critical - if they release it in large quantities then it could obviously effect rice prices. It is important that the rice is released in smallish lots of 300,000-400,000 tonne lots," Chookiat said.