Rice Prices May Extend Rally as Floods Cut Harvest 20% in Biggest Exporter
The worst floods in four years in Thailand, the world’s biggest rice exporter, may cut production from the nation’s main crop by up to 20 percent, likely extending a rally in prices, an industry group said.
“Production may fall by about 15 to 20 percent from last year to less than 20 million tons,” Banjong Tungjitwattanakun, vice president of the Thai Rice Mills Association, said in an interview. Output from last year’s main crop was 23.3 metric million tons, according to the Agricultural Economics Office.
Crop damage in Thailand comes amid production losses caused by storms and flooding in Pakistan and the Philippines, cutting global supplies. Rice prices in Chicago have surged about 45 percent from this year’s low on June 30, driven by rising demand.
“Potential supply losses could drive Thai rice up by around $20 to $30 a ton, shoring up global prices,” Banjong said by phone. Prices may peak in early November, when buyers return to the market as harvests start, he said.
Thai rice, the benchmark price for Asia, has gained 11 percent from this year’s low in July and was at $510 a ton today, according to the Thai Rice Exporters Association.
Rough rice in Chicago gained for a seventh day, climbing as much as 1.2 percent to $14.08 per 100 pounds at 5:30 p.m. in Singapore. The price yesterday rose to $14.20, the highest level since Feb. 22.
Flood Damage
Key growing areas in Thailand’s central, northern and northeastern provinces were affected by the floods, said Banjong. Some mills have been deluged, damaging stockpiles, he said.
Thailand produces two rice crops a year, with the main crop harvested from late October to April accounting for about 75 percent of the country’s output.
Thai rice exports this year will probably reach a target of 8.5 million tons, Commerce Minister Porntiva Nakasai said in Bangkok today.
Heavy rains and flash floods inundated 24 provinces since the beginning of October, damaging 1.7 million rai (0.7 million acres) of farmland, including 1.3 million rai of rice, according to Farm Minister Theera Wongsamut. After the waters recede, the ministry will assess the damage, he said in a statement. Floods, which have killed 11 people since Oct. 10, remain in four provinces, the Department of Disaster Prevention and Mitigation said in a statement today.
Deadliest Floods
The Philippines, the world’s largest importer, may lose 600,000 tons of rice after Typhoon Megi struck some of the nation’s biggest producing areas, Agriculture Undersecretary Antonio Fleta said Oct. 18.
Pakistan’s deadliest floods last month ruined crops worth 281.6 billion rupees ($3.27 billion), destroying 2.39 million tons of rice, Farm Minister Nazar Muhammad Gondal said Sept. 28. Pakistan was the world’s third-biggest exporter last year.
Rice production in the U.S., the fourth-biggest exporter, may be at least 10 percent smaller than estimated, missing a forecast for record output and pushing prices to as high as $17 per 100 pounds, Dwight A. Roberts, president of the U.S. Rice Producers Association, said Oct. 12.
A La Nina weather event this year has brought heavier-than- usual rainfall to parts of Australia and Asia, including Thailand. The weather event will intensify around the end of the year, Thailand’s Meteorological Department has said.
Expectations that rice prices may rise as floods cut production drove gains in the shares of Thai rice producers Patum Rice Mill & Granary Pcl and Thai Ha Pcl.
Patum Rice, the nation’s biggest publicly traded rice packager, gained as much as 2.2 percent to 69 baht before closing at 68.5 baht, the highest finish since April 2008. Thai Ha jumped as much as 6.5 percent to 6.6 baht.
To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net
To contact the editor responsible for this story: James Poole in Singapore at jpoole4@bloomberg.net
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