Rice prices falling despite floods in South-East Asia

Jan 20, 2012, 4:52 GMT

Bangkok - World rice prices fell 3 per cent month-on-month in December and are on a downward trend for the first half of 2012 despite extensive flood damage to South-East Asia's crop late last year, the Food and Agriculture Oganization said Friday. The increases were seen after concerns last year that food prices would rise because of a drought in China's wheat-growing region and floods in the rice basket of South-East Asia.

But the UN agency said, 'Bountiful harvests in other areas more than made up for crop losses in regions affected by severe weather and fluctuating climatic conditions.'

Its cereals price index saw a 4.8-per-cent drop in December from the previous month. Maize fell by 6 per cent, wheat by 4 per cent and rice by 3 per cent.

In December, the price of Thai white 100-per-cent B second-grade rice, which sets the international benchmark, was 620 dollars per ton, down from 649 dollars per ton in November, a 4.5-per-cent drop.

Although floods in September and October damaged rice crops in Cambodia, Laos and Thailand, India has taken up much of the slack on the international rice market.

India, which ended a three-year ban on non-basmati rice exports in September, exported 2.2 million tons of rice last year. 'India stands to gain from the rising price of rice from Thailand, the world's leading rice exporter, as buyers seek to source the grain at cheaper prices,' the UN agency said.

Thailand, which has been the world's leading rice exporter for the past five decades, exported 10.5 million tons last year, but it is likely to witness a 30-per-cent decline in rice exports this year, according to the Thai Rice Exporters Association.

The Thai government last year introduced a rice price guarantee scheme for farmers, promising them 500 dollars per ton regardless of world market prices. That measure has effectively priced Thai rice out of the international market.

To date, the scheme has had little impact on world rice prices as India's cheaper rice has quickly replaced Thai rice, the UN agency said.

Sumiter Broca, its Bangkok-based rice expert, predicted that India would export 4.5 million tons of rice this year.

'The fact is there is plenty of rice on the market, so I don't see any potential for an increase in rice price until the summer of 2012,' Broca said. 'For the next few months, the trend will be downward.'

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