Cadmium Scare Boosts Appeal of North China Rice, Thai Imports

Consumers in China are turning to well-known brands from northern provinces and Thai imports after high traces of cadmium were found in some long-grain rice in the country’s south, a commodities analyst said.

Demand for Thai rice, which can cost as much as nine times local grain, is rising, said Wang Shutong, an analyst at commodity information provider Sublime China Information Co. The price of rice from northeast Heilongjiang province, which produces the short-grain japonica variety, has risen as much as 2.6 percent this month, according to data tracked by SCI.

Shares (600598) of Heilongjiang Agriculture Co., China’s biggest listed producer of short-grain rice, surged 19 percent in Shanghai trading this month, outpacing the Shanghai Composite Index’s 5.5 percent gain, as reports on contamination increased. China’s President Xi Jinping last week signaled a tolerance for slower economic expansion to avoid environmental degradation.

“This incident highlights the frightening conditions of China’s soil and water quality,” Wang said by phone on May 23 from Zibo city in Shandong province. “The immediate reaction of consumers is to buy rice from places relatively free of pollution, and that points to imports and the country’s far-north.”

Tight import quotas mean that Thailand and other exporting nations can’t accelerate shipments to take advantage of rising demand, Wang said. Thailand is the biggest exporter of premium-quality rice to China while Vietnam and Pakistan ship lower-grade grain that is often blended with domestic rice, he said.

Imports from Thailand last year were 175,351 tons, down from 325,620 tons in 2011, according to China’s customs data.

Toxic Metal

The Nanfang Daily first reported in February that rice from Hunan sold in southern Guangdong province contained excessive levels of toxic metal and the Guangzhou Food and Drug Administration reignited concerns with reports on its website on May 16.

“My friends are buying organic products they trust through their own channels, and some are even going to Hong Kong to buy rice,” said Xiong Si, a magazine editor and a consumer from Guangzhou. “There is little trust in domestic food.”

Sales from mills in Hunan province, the first reported origin of the tainted rice, are stalling and 70 percent of processing plants have halted operations, according to SCI. Traces of cadmium above government limits have also been found in rice from neighboring Jiangxi province and Guangdong, China News Service reported May 21, citing authorities in Foshan city.

Rough rice traded in Chicago rose 1 percent to $15.715 per 100 pounds on May 24, taking gains for the year to 3.6 percent.

Rice futures on the Zhengzhou Commodity Exchange, which trades the same variety of the grain grown in Hunan, have fallen 2.9 percent this year and the September contract traded 2,620 yuan ($428) per ton at 10:15 a.m.

Heilongjiang Agriculture shares were not trading today ahead of “significant events” involving the company and will resume within five working days, according to a company filing to the Shanghai Stock Exchange.

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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