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Rice May Fall on ‘Abundant’ Thai Supply, Aiding World’s Poor as Corn Gains

Increased rice supplies from Thailand, the biggest shipper, may help to boost global stockpiles and cap prices, the Food and Agriculture Organization said, mitigating record food costs that have pushed millions more into poverty.

“There is enough production in the world to keep prices down,” Concepcion Calpe, a senior economist at the United Nations’ agency, said in an e-mail interview. Thai supplies may be “abundant” this year, with rising output helping to boost reserves, Calpe wrote, without giving precise forecasts.

Global food prices reached a record in February, driving 44 million more people into extreme poverty, according to a World Bank estimate that month. Lower prices of rice, the staple for half the world, may help to ease global inflationary pressures and cut costs for buyers such as cereal maker Kellogg Co. (K)

“African and Asian consumers should be smiling,” Tom Slayton, an Alexandria, Virginia-based rice analyst and former publisher of The Rice Trader, said by e-mail. If the Thai crop forecast is accurate, “world rice prices are not going to follow the other grains and are likely to decline.”

Rice has lagged behind as corn and wheat rallied on harvest disruptions and stronger demand. Corn has jumped 96 percent over the past year in Chicago, while wheat has rallied 54 percent and soybeans have risen 38 percent. Rice, up 25 percent in Chicago, may be “separating us from a food crisis.” Abdolreza Abbassian, a senior economist at the FAO, said in March.

Competition from Vietnam, “also tends to depress rice prices in Thailand,” Calpe wrote in the April 28 e-mail. The Southeast Asia nation, the world’s second-largest shipper, may export more than 7 million tons this year, the FAO said in a report on its website on May 2.

Thai Prices

Thai rice-export prices, the benchmark for Asia, have dropped 9 percent since Feb. 9, and the 100 percent, grade-B variety was at $508 per metric ton on April 27. Rough-rice futures in Chicago traded at $15.405 per 100 pounds at 9.13 a.m. in Singapore today, 7.8 percent higher this year. The Chicago price peaked at a record $25.07 in April 2008.

Thai rice “production this year should be plentiful,” Thosakdi Vanichkajorn, director-general of the Thai Meteorological Department, said in an interview. “The weather now is suitable for planting rice, unlike last year when the main planting season was pushed off as rains were delayed.”

Record global food costs squeeze the world’s poor hardest as they can spend more than half of their incomes on feeding themselves, according to a Feb 15. estimate from World Bank President Robert Zoellick. The food-price surge is also boosting inflation worldwide, spurring central banks from China to the euro region to increase interest rates, potentially curbing consumer spending and slowing economic growth.

Rising Inventories

World inventories of rice may advance 7 million tons to 139 million tons this year, the highest level since 2002, the FAO said in its April Rice Market Monitor. Next year, closing global inventories may surge to 150 million tons, based on a preliminary forecast, it said.

“With increasing supplies, Thai rice prices may decline by $20 a ton,” said Kiattisak Kanlayasirivat, a director at Novel Commodities SA’s Thai office, who correctly forecast a rally late last year. Still, demand from Africa and the Middle East will likely support prices, Kiattisak said. Novel trades about $600 million of rice a year.

The secondary Thai crop, which is being harvested through to July, is forecast to climb 6.3 percent to a record 9.42 million tons, the Office of Agricultural Economics, a forecaster under the farm ministry, said on its website on April 21. The main harvest, which represents 70 percent of total output, may gain 4.6 percent to a two-year high of 23.2 million tons in the year starting October, according to the farm ministry.

‘Will Be Bearish’

“Should this forecast be borne out by monsoonal developments, this will be bearish for U.S. and Vietnamese exporters,” wrote Slayton, the Virginia-based analyst. The U.S. is the world’s third-largest shipper, according to the U.S. Department of Agriculture, or USDA.

About 90 percent of the world’s rice is grown in Asia and it’s the staple for more than 3 billion people worldwide, according to the Los Banos, Philippines-based International Rice Research Institute, or IRRI. When rice tripled in 2008, 100 million were driven into poverty, according to IRRI’s website.

Lower rice prices may benefit cereal makers such as Kellogg and General Mills Inc. (GIS) as well as buyers like Uncle Ben’s, Slayton wrote, referring to the brand owned by Mars Inc., which also makes Spearmint gum and Whiskas pet food.

Thailand, which represents one-third of global shipments of 30 million tons, may export 10 million tons in 2011, near a record 10.1 million shipped in 2004, the USDA said on April 8.

While Thai farmers may harvest more rice, their U.S. counterparts may cut back, favoring other crops. Growers in the U.S. planned to cut rice plantings 17 percent to 3.018 million acres (1.221 million hectares) this year, because of attractive returns for corn, cotton and soybeans.

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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