UN Sees Smaller Increase in Rice Output as El Nino Parches Crops

The global rice harvest will increase less than previously estimated because of a strengthening El Nino, reducing stockpiles for a second year, the United Nations said.

Milled output will reach 499.3 million metric tons this year, compared with 499.9 million tons forecast in April, the UN’s Food & Agriculture Organization said Wednesday. That would be higher than a revised 494.7 million tons in 2014. Reserves carried into 2016 will drop to 169.4 million tons, 1.6 million tons less than estimated, as consumption for food, feed and industrial use will increase to 507.2 million tons.

Slower output growth and smaller inventories may support Thailand’s export price, an Asian benchmark, which declined to a seven-year low in June. Prices fell as the top shipper started to auction record inventories, accumulated under a farm-income support program. El Nino may parch crops in top suppliers including Thailand, India and Vietnam, the Rome-based FAO said in its quarterly report.

“The revision mainly takes account of adverse weather conditions in several countries, in the form of belated arrival and insufficient rainfall, often associated to the prevalence of an El Nino,” the FAO said. The weather pattern may persist into next year, the agency said.

The price of Thai 5-percent broken white rice dropped to $373 a ton in June, the lowest level since December 2007. Futures in Chicago sank in May to $9.25 per 100 pounds, the lowest level since 2006.

Thai Harvest

While Thailand may harvest 34.7 million tons this year, about 2 million tons below the 2009-2013 average, shipments are forecast to remain around 10.9 million tons, unchanged from last year, the FAO said. Sales from state stockpiles, which are estimated at 10.6 million tons, will help Thailand maintain the lead over other exporters.

The forecast for shipments from India was raised by 700,000 tons to 10 million tons and exports from Vietnam may reach 6.3 million tons, according to the report.

Global rice trade is estimated at 42 million tons, about 700,000 tons above the April forecast, the FAO said. That would still be 2 percent short of a record in 2014, it said.

Inventories in 2016 will drop by 7.8 million tons, marking the second consecutive year of drawdowns after nine years of uninterrupted accumulation, the FAO said. The stocks-to-use ratio is forecast to drop to 32.8 percent in 2015-2016 from 34.9 percent the previous year, it said.

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