Rice May Extend Decline, Limiting Food Costs, UN's Calpe Says

Rice, the staple for half the world, will probably drop on increased supplies, trailing other grains and curbing record food costs, the United Nations said.

Global stockpiles will increase 4.6 percent to 137 million metric tons by the end of this season, the highest level since 2002, Concepcion Calpe, senior economist at the UN Food & Agriculture Organization, said in an interview. Rice may drop 9.3 percent to $12 per 100 pounds in two months, said Jonathan Barratt, managing director at Sydney-based Commodity Broking Services Pty, who correctly predicted last year’s advance to $15.

Rice declined 1.1 percent to $13.23 per 100 pounds today as grains tumbled amid a rout in global markets after Japan’s Prime Minister Naoto Kan said the risk of further radiation leaks was rising at a nuclear power station north of Tokyo. Climbing grain, dairy and cooking oil prices pushed global food costs to a record in February, the UN has said, fueling conflict in Libya and helping to oust leaders in Egypt and Tunisia.

“The price will weaken because supply is ample and can easily meet import demand,” Calpe said from Rome. “There is no scarcity of rice in the market.”

Rice fell to a five-month low in Chicago on March 11 after the U.S. raised its estimate of world inventories. The grain advanced about 4.9 percent in the past year, lagging behind a 49 percent increase for wheat and an 82 percent surge for corn.

Global stockpiles may increase to an eight-year high of 98.8 million tons, the U.S. Department of Agriculture said March 10. The department raised its inventory estimate from 93.85 million tons in January.

Rising Supplies

While the USDA lowered its estimate for the global harvest, it also pared its outlook for demand and raised the forecast for inventories in China and India, the top producers. Year-ending stockpiles in Thailand may be 5.2 million tons in 2011, equal to about 17 percent of world import demand, according to FAO data.

The 9-magnitude earthquake in Japan on Friday, the strongest on record, and the seven-meter tsunami may not have a major impact on the global rice market, Calpe said.

“The country is sitting on huge stocks to cover the needs and no supply shortage is anticipated,” she said. “This event shouldn’t change the fundamentals.”

The harvest of the second crop in Thailand, the biggest exporter, may total about 9 million tons, Pramote Vanichanont, honorary president of Thai Rice Mills Association, said in an interview March 8. That compares with 8.86 million tons the previous year, according to the Office of Agricultural Economics. The second crop represents about 30 percent of output.

“Abundant supplies of rice in inventories and upcoming crops are putting pressure” on prices, said Pramote, a member of the National Rice Policy Committee.

Thai prices, the benchmark for Asia, declined to a four- month low last week as orders subsided and supply increased, the Thai Rice Exporters Association said March 9. The price of 100 percent grade-B white rice dropped to $528 a ton, the lowest level since Nov. 3, said Pisanu Sangyoo, an association official.

To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole in Singapore at jpoole4@bloomberg.net

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