Increasing demand from major buyers like China may shrink the supply and hence push the prices up may require the Asian nations to build up their rice stocks, according to global research house The Rice Trader.
Jeremy Zwinger, the president and CEO of the California-based research institute said that China has now only have 2.2 million tons against its 4.5 million tons rice requirement will purchase rice aggressively so it is clear that the demand is going to rise.
USDA estimates show that in 2014 China’s rice import has raised and it reached to 4 million tons of rice against 3.2 million tons in 2013.
China’s rice import showed a remarkable sign in the year 2007 when its rice import increased by seven times the average of previous five years and till then iots showing a remarkable increase in rice import for four consecutive years.
The Rice Trader also expects Indian rice stocks to jump to nearly 10 million tons this year. As of early May, India’s rice stocks had plunged by 22 percent to 22.23 million tons from the previous year, according to statistics from Food Corporation of India (FCI) issued recently.
Rice Trader data from five rice exporting countries — Thailand, India, Vietnam, Pakistan and the US — shows that overseas shipments in 2014 reached historically high levels at 34.67 million tons, up 12.4 percent from 2013.
The potential of a long drought caused by El Niño would be another factor to watch, as it might pose a significant threat to production, Zwinger noted.
Scientists have warned that the world is on track for another year of record-setting heat, with temperatures having hit a new high in the first four months of this year.
Australia’s weather bureau has already declared the major event of El Niño, which is caused by a reversal of trade winds in the Pacific, causing ocean temperatures to rise.
Apart from bringing unseasonably dry conditions to Australia and India over the next several months, forecasters have also said El Niño could trigger famine in West Africa.
Zwinger said that over the next several months rice prices would stay at a low level on abundant supplies from rice-producing countries, particularly Thailand.
In the first two months of this year, Thai rice exports totaled 1.34 million tons, and if the trend is maintained, the country’s rice exports will reach 8.04 million tons, still much lower than 10.97 million tons exported in 2014, according to The Rice Trader.
Within such a buyer’s market, Zwinger recommended Asian countries, including China, Indonesia, and the Philippines, to buy overseas, as the situation might change into a seller’s market immediately, describing the current situation as a “transition” moment.
“The price now is very acceptable, especially with the risk that the oil price will go back [up, the risks of weather we keep seeing and the fact we had many years of lower production,” he said during Thai Rice Convention recently.
As of May 15, rice prices from key suppliers followed a downward trend from the past year. Thai’s 100 percent grade B rice price, for example, dipped by 3.75 percent to US$385 per ton, and India’s 5 percent broken rice price declined by 12.05 percent to $365 per ton, according to data compiled by The Rice Trader.
Indonesia’s state-owned logistics firm BULOG finance director Iryanto Hutagaol, however, said the government had no immediate plan to import rice, as at present, rice stocks at Bulog warehouses was sufficient, while production was good and Indonesia has also delayed planting season which will extend the harvest season into June from the normal end period in April.