Rice price rises to 15-year high
Brazil may have to import rice after severe flooding in the south of the country. Indonesia is still buying significant quantities on the world market
Bad weather is rattling the rice market once again, forcing prices for the staple foodstuff back close to 15-year highs after a brief lull.
Supplies had already been hit by sweeping export restrictions imposed by leading shipper India last year and fears that drier El Niño-induced weather would curtail production in the important rice-growing region of Southeast Asia. Now catastrophic flooding in southern Brazil is adding to the anxiety.
Prices for Thai 5% milled white rice, the Asian benchmark, have jumped $71 since early April to $649 a tonne after falling from a peak in January, when they were the highest in more than 15 years. The grain is vital to the diets of billions of people in Asia and Africa, and a new jump in prices could spark inflation and increase import bills for buyers.
Severe flooding in Brazil has contributed to the recent price spike, with the state of Rio Grande do Sul, which accounts for 70% of Brazil’s rice production, expected to be affected for several more weeks, according to Charles Hart, commodities analyst at Fitch Solutions’ BMI division.
“The floods coincided with the Brazilian rice harvest, some of which has not yet been completed,” Hart said. This “raised serious concerns” about domestic production levels and a possible export surplus, he added.
Last week, President Luiz Inacio Lula da Silva said rains would delay the rice harvest in Rio Grande do Sul state, meaning the country would likely have to import rice and beans. Brazil is the world’s ninth-largest rice exporter, according to the U.S. Department of Agriculture.
A slowdown in new crop supplies in Southeast Asia is also helping prices, according to Peter Clubb, a commodities market analyst at the International Grains Council in London. This is due to the end of the off-season harvest in Thailand and the main winter-spring crop in Vietnam, he said. Thailand is the second largest exporter and Vietnam is the third.
On the demand side, Indonesia is still buying significant volumes, which is helping to support bullish sentiment, Clubb said. The pace of purchases in that country, as well as possible changes in India’s export restrictions, will influence prices going forward, he added.
However, weather conditions remain a major factor.
“We will need to keep an eye on the weather in the coming months, especially the wet season in Thailand, Vietnam and India,” Klabb said. “The key factor will be the transition from El Niño to La Niña.”
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