Thursday, September 22, 2011

Rice May Drop as Indian Shipments Intensify Competition for Export Orders

Rice, which has beaten corn and soybeans in the past year, may drop as India restarts non- basmati exports after lifting a ban, buyers including Indonesia purchase less than expected and global harvests gain to a record.
The Indian shipments will have a bearish impact and futures may average $16 per 100 pounds in Chicago in the fourth quarter, according to Abah Ofon, an analyst at Standard Chartered Plc. That compares with $16.988 so far this quarter. Prices may fall as India’s shipments cut Thailand’s market share in Africa, said Mohammad Ismet, a senior adviser to Indonesian food agency Bulog.
Cheaper rice may improve the lives of the 1.1 billion the World Bank says live on less than $1 a day, while restraining food inflation and cutting the pressure on central banks to raise interest rates. Global food prices have rallied 26 percent in the past year, bolstered by a plan by Thailand, the largest exporter, to buy rice from farmers at above-market rates.
“There will be some short-term fears on India entering the white-rice market,” said Jeremy Zwinger, chief executive officer of The Rice Trader, a weekly industry report based in California. Still, “with Thailand staying strong on the price intervention, there may be a reversal of ideas as India sells quantity very quickly.”
Rice has surged 42 percent in Chicago in the past 12 months, beating rallies in corn and soybeans, while wheat has declined. The November-delivery contract climbed 0.2 percent to $17.225 at 4:20 p.m. in Singapore. The price touched $18.54 on Sept. 12, the highest since October 2008. The weekly rate for 100 percent grade-B Thai rice was quoted at $619 per metric ton today.

Indian Exports

India’s government, which banned private companies from shipping non-basmati rice in April 2008 amid a global food crisis, lifted that restriction on Sept. 8. Exports from the world’s second-largest producer may total 4 million tons in the year from April 1, Vijay Setia, president of the All India Rice Exporters Association, said on Sept. 13.
Indian shipments will account for 11 percent of global trade this calendar year, overtaking the U.S. and Pakistan to become the third-largest shipper, according to the U.S. Department of Agriculture, or USDA, in a Sept. 12 report.
Shipments from Pakistan may exceed 4 million tons in 2011- 2012, beating a USDA estimate for exports, Shamsul Islam Khan, a board member of the Rice Exporters Association of Pakistan, said at a conference in Singapore today. Production may surge 38 percent to 6.5 million tons in 2011-2012, he said.
“I don’t see rice prices running away,” Ofon, the analyst at Standard Chartered, said in an interview in Singapore today. “Prices will moderate.”

‘Quite Dangerous’

The end of India’s curbs, coupled with Thailand’s plan, may add to volatility, exposing traders to potential losses, said Amit Gulrajani, general manager for rice trading and shipping at Olam International Ltd. (OLAM), one of the world’s three biggest rice traders. “Going long or short could be quite dangerous,” said Gulrajani, referring to bets on gains and losses.
Imports by Indonesia may be capped at 1.2 million tons this year, said Bulog’s Ismet. That’s less than a forecast of 2.2 million tons from the USDA. Imports include the 400,000 tons bought from Vietnam last week, Ismet said.
Bangladesh, South Asia’s biggest buyer, may cut its forecast for imports by half as local output climbs, according to the Bangladesh Directorate General of Food. Shipments may total 400,000 tons in the year from July 1 compared with 800,000 tons estimated two months ago, according to Badrul Hasan, director for procurement at the Bangladesh Directorate General of Food. Imports were 1.26 million tons in the year to June 30.

Record Production

Global output may climb to a record 458.4 million tons in 2011-2012, buoyed by larger harvests in China, the Philippines and the U.S., according to the Sept. 12 report by the USDA. That would be a second year of record supply, outpacing demand and lifting so-called ending stockpiles to the highest level in nine years, the USDA said.
Thailand plans to pay 15,000 baht per ton ($493) for unmilled white rice and 20,000 baht for Hom Mali fragrant rice, as much as 50 percent above current rates, according to Bloomberg News calculations based on data from the Thai Rice Mills Association. The country is willing to give up its position as largest exporter to boost rural incomes, Deputy Prime Minister Kittiratt Na-Ranong said on Sept. 12. State purchases are due to start on Oct. 7.
Thailand’s rice-buying policy may “create problems” for the government as it will inflate stockpiles and the state may be unable to sell them on the open market without losses, Abdolreza Abbassian, senior economist at the Food & Agriculture Organization, said in an interview in Singapore yesterday.
The Thai export price may gain to about $650 a ton by the yearend, said Kiattisak Kanlayasirivat, a director at Novel Commodities SA’s Thai office, who correctly forecast a rally late last year. “That is the level that buyers can accept.”

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