Rice Prices Seen Under ‘Pressure’ on Ample Supply, FAO Says

May 4 (Bloomberg) -- Rice prices will probably remain under “pressure” in coming months as global production outpaces consumption for the eighth consecutive year, according to the United Nations’ Food & Agriculture Organization.

“Under current prospects of ample availabilities, export prices could remain under downward pressure in the coming months, which also depends on unfolding of the season and policies in major exporting or importing countries,” said Concepcion Calpe, the FAO’s senior economist, in an e-mail.

Global paddy production in 2012 is expected to increase 1.7 percent to 732.3 million metric tons, equivalent to 488.2 million tons of milled rice, exceeding consumption at 477 million tons and boosting inventories, the Rome-based agency said in its first forecast for the 2012-13 season. Output is expected to climb in Bangladesh, China, India, Myanmar, Pakistan, the Philippines and Thailand, it said.

Lower prices of the staple for half the world may extend a decline in global food costs, which fell for the first time this year in April on lower costs for grain and sugar, an index of 55 items tracked by the FAO showed. World grain production will rise 1.1 percent to a record 2.37 billion tons in 2012 as bigger harvests of corn and rice more than make up for a smaller wheat crop, the FAO said in its food-outlook report yesterday.

“The large and growing stockpile could be a distinctly bearish factor in the year ahead as it is not known when inventories will be released to the world market,” said Darren Cooper, a senior economist at the International Grains Council in London.

Higher Stockpiles

Rough-rice futures for July delivery were little changed at $15.2 per 100 pounds on the Chicago Board of Trade at 1:49 p.m. London time. Prices climbed 2.2 percent yesterday.

Ending stockpile in 2012 may rise 8.4 percent to 152.8 million tons, on reserve replenishment mainly in China, India, Indonesia and Thailand, the FAO said today. The increase is also driven by the government’s rice purchase program in Thailand, which will boost its ending-stock of milled rice by 20 percent to 7.4 million tons in 2012. Global inventories will rise to 164 million in 2013, it said.

The global rice trade is projected to fall by 2 percent in the 2012 calendar year to 34.3 million tons “driven by faltering import demand in the major traditional markets in Asia,” FAO said.

Thailand, the biggest shipper, may have a decline in shipments because of the government’s support policy on domestic prices, which has ‘significantly’ eroded its competitiveness, the FAO said. Its rice exports may tumble 29 percent to 7.5 million tons in 2012, it said. Exports from Vietnam, the second largest shipper, may expand 1.2 percent to 7.2 million tons, while India will become the third largest exporter, with shipments surging 58 percent to 6.3 million tons.

“Counting on ample and relatively cheap supplies, India appears well placed to increase its deliveries and capture a larger share of the market,” the FAO said.

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 at jpoole4@bloomberg.net