Record reserves of rice in Thailand, accumulated from a state-buying program that has spurred concern from the International Monetary Fund (IMF), are seen contributing to lower prices next year as worldwide harvests expand.
Record reserves of rice in Thailand are seen contributing to lower prices next year as worldwide harvests expand. (Photo by Sonthanaporn Inchan)
The stockpiles probably total 16 million metric tonnes, which will pressure global prices, according to Eklavya Chandra, director at Bangkok-based Phoenix Commodities Ltd (Thailand). The Thai holdings will surge 18% to 14.9 million tonnes in 2013 and 2014, the International Grains Council forecasts.
The third-largest shipper started buying the grain from farmers at above-market rates in 2011 to boost rural incomes, fulfilling a campaign pledge by the Pheu Thai Party, which won a parliamentary majority that year. The IMF said last week the program was likely to generate wider losses and should be dropped in favor budgetary transfers to low-income households. Thai ministers said they will press on with the intervention.
"Everybody realises that 16 million tonnes cannot be sold in a year or two years, so there is no bullish trend in the market," the Phoenix director said in an interview in Hong Kong, where he is attending a conference. "Supply continues to increase, while Thai stocks put more pressure on prices."
The price of Thai 5% broken white rice, an Asian benchmark, tumbled 26% this year to US$433 a tonne, contributing to lower food costs as harvests of corn, wheat and soybeans increased. World food prices tracked by the Food and Agriculture Organisation (FAO) lost 5.3% in the past year.
'Buyers' Market
"It's still a buyers' market because supply is actually more than demand," said Anthony Lam, vice chairman at Hong Kong-based Golden Resources Development International Ltd. "In the short term, the Philippines is going to buy and Indonesia will buy soon, before the election, that will spike up prices."
The Philippines may boost imports 20% to 1.2 million tonnes next year after Typhoon Haiyan struck the country, the FAO said on Nov 19. Still, the storm's impact on output is minimal as most harvests had been gathered, Orlan Calayag, administrator of National Food Authority, told the conference on Thursday.
"The global surplus is large enough to be able to cope with any large tender by the Philippines," said Darren Cooper, senior economist at the International Grains Council (IGC). "I doubt that it would have a significant impact on the world market since the additional demand would likely be temporary."
World stockpiles will expand 1.2% to 109.3 million tonnes in 2013 and 2014 as reserves in the five largest exporters including Thailand gain to records, IGC forecasts show. Global output will climb to an all-time high of 474 million tonnes, topping demand by two million tonnes, the data show.
Hurt Crops
Bad weather that hurt crops in the Philippines as well as in India will provide price support in the near term, said Samarendu Mohanty, senior economist at the International Rice Research Institute, based in Los Banos, the Philippines. Output in India may drop as much as five million tonnes to about 100 million to 105 million tonnes in 2013 and 2014, Mohanty said.
"With these Philippines and India cases, and China importing more, I don't think the price will go down any more," said Mohanty, forecasting a gain of as much as $30 a tonne by the end of March. "The upside is limited by ample supply in the market and stockpiles in Thailand."
Thailand has spent 678 billion baht ($21.3 billion) since October 2011 buying about 29 million tonnes of milled rice from farmers. The program spurred the buildup of record reserves and dethroned the country as the largest exporter.
Thailand will sell 1.2 million tonnes of rice to Beijing Great Northern Wilderness Rice Industry, a state-owned company, according to a statement from the Commerce Ministry on Wednesday. The price will be based on market rates and the shipment will be delivered by the end of December, it said.