Floods Ruining 14% Of Thai Rice Erases Global Glut

[george]

Floods Ruining 14% of Thai Rice Erases Global Glut: Commodities

BANGKOK: -- Thailand’s worst floods in more than a half century may have wiped out as much as 14 percent of paddy fields in the world’s biggest rice exporter, potentially erasing the predicted global glut.

The Thai export price, a global benchmark, may climb 20 percent to $750 a metric ton by December, said Sumeth Laomoraphorn, the president of C.P. Intertrade Co., the country’s largest seller of packaged rice. Tropical storms inundated 62 of 77 provinces, destroying 1.4 million hectares (3.5 million acres) and as much as 7 million tons of crops, the government says. That equals 4.6 million tons of milled grain, 1 million more than the surplus anticipated by the U.S. Department of Agriculture.

Rice, a staple for half the world, was already this year’s best-performing agricultural commodity after drought cut the U.S. harvest to the lowest level in 13 years. Prices also rose as Thailand started buying at above-market costs to boost farmer incomes. That is adding renewed pressure to global food prices monitored by the United Nations, which had dropped 5 percent from a record in February as other grains declined.

“I’ve never seen such a catastrophe, watching the field turning into a sea of floodwater,” said Wichian Phuanglamchiak, a 74-year-old farmer in the central province of Ayutthaya, speaking from the second floor of his house. “My entire crop was wiped out and I have to wait for the water to recede before I can replant in December.”

Export Price

Thailand’s export price jumped 13 percent to $625 a ton this year as wheat tumbled 19 percent in Chicago and soybeans fell 12 percent. The Standard & Poor’s GSCI Agriculture gauge of eight commodities retreated 11 percent, while the MSCI All- Country World Index of equities dropped 6.9 percent. Treasuries returned 7.5 percent, Bank of America Corp. indexes show. Rice futures on the Chicago Board of Trade have jumped 12 percent since Oct. 10.

The main Thai harvest, which represents about 70 percent of annual output, was expected to expand 3.3 percent to a record 25.1 million tons before the floods, government estimates show. The disaster began in the north in July and has now spread across 81 percent of provinces. The estimated losses may worsen once the water recedes, Apichart Jongskul, the secretary-general of the Office of Agricultural Economics, said Oct. 21.

World markets depend on Thailand because it was expected to account for 31 percent of all exports this year, USDA estimates show. Global rice production was projected to climb 2.2 percent to an all-time high of 461.4 million tons this year, compared with demand of 457.8 million tons, the Washington-based department said Oct. 12.

Arkansas, Texas

Farmers in Arkansas, accounting for 42 percent of U.S. output, faced flooding earlier in the year and then drought, reducing the crop by 32 percent, according to the USDA. Texas, the fourth-biggest grower behind California and Louisiana, had the driest 12 months since records began in 1895, according to John Nielsen-Gammon, the state climatologist in College Station. The U.S. accounts for about 10 percent of global exports.

In the Philippines, the biggest buyer in 2010, about 600,000 tons of rice were damaged by storms this year, Lito Banayo, the administrator of the National Food Authority, said Oct. 20. That’s 4.6 percent of the country’s annual consumption.

Thailand can still boost rice exports by 22 percent to 11 million tons this year even with the losses from the floods, Yanyong Phuangrach, the permanent secretary for commerce, said Oct. 14. That’s 500,000 tons more than the USDA is expecting. Farmers can also replant after the floods recede and make up some of the lost production, said Abah Ofon, a commodities analyst at Standard Chartered Plc in Singapore.

Non-Basmati Varieties

“I’m not entirely convinced yet that it’s going to lead to shortfalls in export capacity,” Ofon said. Supplies from India and Vietnam may help compensate for losses, he said.

India, the world’s third-largest exporter, may boost production to a record 100 million tons this season, the USDA estimates. That may increase shipments by 61 percent after the government lifted a ban on selling non-basmati varieties last month. Vietnam, the second-biggest shipper, plans to sell more than 7 million tons in 2011, Bui Ba Bong, deputy minister of agriculture and rural development, said Oct. 20.

While more supply may be available from India, it may not be moved in time to meet demand because of limits on port capacity, said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Los Banos, Philippines.

“India can only ship so much,” said Jeremy Zwinger, president and chief executive officer of The Rice Trader, a researcher in Durham, California. Shipments in September were 258,000 tons, a monthly level that would not be enough to offset losses in Asia, the U.S. and South America, he said.

Profitable Crops

Flooding has damaged 13 percent of crop areas in Thailand, 6 percent in the Philippines, 12 percent in Cambodia and 7.5 percent in Laos, according to the UN Food & Agriculture Organization. This has “potentially bullish ramifications” for prices, which may put pressure on inflation, Deutsche Bank AG said on Oct. 24.

Production in South America may decline as much as 15 percent from a year earlier as the so-called La Nina weather pattern cuts rainfall and farmers shift to more profitable crops including soybeans, Bruno Lanfranco, a senior researcher at the National Agriculture Research Institute in Uruguay, said Oct. 21. La Nina is a period of cooling equatorial waters in the Pacific Ocean that can mean dry weather in parts of the Americas.

South America, the fourth-largest of 11 rice-growing regions tracked by the USDA, is projected to produce 16.1 million tons this marketing year, the agency estimates.

Rising Demand

Equity and commodity markets slumped since May amid slowing growth and Europe’s debt crisis. Demand for rice is unlikely to weaken. Consumption has increased every year since 2006, including during the worst global recession since World War II.

Economic growth in the Group of 10 countries may accelerate to 1.84 percent next year from 1.45 percent in 2011, according to a composite of economists’ forecasts compiled by Bloomberg.

“I’m bullish,” said Zwinger of The Rice Trader. “The only thing holding the market back right now is India. They have some stockpiles, but I don’t think it’s enough.”

-- businessweek.com 2011-10-26

[renaissanc]

Thailand could increase its rice production by 30% easily if it would break away from chemical fertilizers and sprays. The country produces bio-fertilizers that can do this, but the Ministry of Agriculture is stuck in the old paradigm of chemicals.

[rogerdee123]

The Govt may end up looking like "Cheap Charlie" with that guaranteed rice price.