The potential impact of El Nino on paddy farmlands worldwide is changing rice trading patterns, triggering importers' fears that lower rice supply from drought caused by the weather phenomenon could translate into higher prices.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the dry spell had now started to affect the world's rice trade psychologically. Importers are increasingly aware the dry weather may worsen to the extent that it hits global rice production.
"The world's rice trading environment is now changing," he said. "Buyers who had been reluctant to purchase rice and keep it in their stockpiles in recent years are now doing just that for fear global rice prices will rise."
Mr Chookiat said the market for parboiled rice had become active again, with higher purchase orders from Nigeria and Benin resuming, leading Thailand's overall May rice exports to surpass 900,000 tonnes from an average of 700,000 tonnes in previous months.
Strong exports are also anticipated next month if Thailand can win a rice import tender from the Philippines. That country is expected to invite tenders from Thailand and Vietnam to supply 250,000 tonnes of rice in July to boost its buffer stocks as well as prevent rice price increases.
The Philippines, one of the world's biggest rice importers, last month said it could buy more if the drought-inducing El Nino intensified, as its government hoped to avert a potential surge in food prices due to possible supply disruptions that could be caused by El Nino, which Japan earlier confirmed had set in.
Last year, the Philippines imported more than 1.8 million tonnes of rice to replenish rice stocks and control price rises.
Higher demand from that country would be good news for regional rice markets that have been flagging this year due to oversupply.
Mr Chookiat said the psychological impact was now clearer, as indicated by higher free-on-board prices for 5% white rice, which rose by US$10 a tonne last week to $385 a tonne.
Local milled rice prices also increased accordingly to 11,500 baht a tonne from 11,120 baht, while paddy prices rose to between 8,000 and 8,200 baht a tonne from 7,700 baht.
However, Mr Chookiat said despite the impact being clearly visible in India and Pakistan and lower-than-expected rainfall in Thailand, it remained unclear whether and how far global rice production would drop. India's monsoon season, due to start in July or August, will have to be closely monitored.
Nonetheless, he said the unusually low rainfall in Thailand was expected to shave production of the second crop by 40-50% from 8-9 million tonnes of paddy this year.
Charoen Laothamatas, president of the Thai Rice Exporters Association, said the main factors dictating prospects for global rice prices were likely to be rice production levels in China and India and how much these countries were affected by drought.
Prospects are expected to be clearly evident around August, when their main crops start being harvested, he said.
Mr Charoen said rice exporters expected Thailand would ship no fewer than 9 million tonnes this year.
As of June 15, Thailand had shipped 3.9 million tonnes of rice this year, fetching 64.2 billion baht, down by 8% from the same period last year.