Thai Rice Stockpiles Seen at Record Amid Warehouse ShortageLuzi Ann Javier
Thailand may be running out of room to store record stockpiles of rice, according to the Food & Agriculture Organization, which said a government price-support program is spurring higher production.
Milled reserves may jump 40 percent to 18.2 million metric tons in 2013, the Rome-based United Nations’ agency said in a report yesterday on the global rice market. The holdings, which averaged 5.4 million tons a year between 2008-2010, have increased from 7.8 million tons in 2011 and an estimated 13 million tons last year, according to the report.
There may be a “looming shortage of storage space,” the agency said. “Government stock-release plans have progressed slowly, further aggravating the supply situation for an export sector that is faced with little offshore demand,” it said.
The projection highlights the buildup of rice in Thailand even as the country is forecast to reclaim its mantle as the biggest exporter this year. The projected stockpiles are enough to cover 48 percent of the global trade in 2012-2013, according to Bloomberg calculations using U.S. Department of Agriculture data. Former Prime Minister Thaksin Shinawatra has said the rice-purchase program should be extended for several more years.
“When Thailand sells from government inventories, the market will go down further,” said Rakesh Singh, a New Delhi-based trader at Emmsons International Ltd., who’s tracked the market since 1993. “That’s making us very nervous because, for sure, Thailand is going to have to offload that.”
The FAO Rice Price Index, which tracks 16 varieties, was at 236 in January, compared with the peak over the past year of 245 in September, according to FAO data in the report. Still, rough-rice futures traded in Chicago gained to $16.29 per 100 pounds on Feb. 5, the highest level since November, 2011.
The Thai buying program has elevated local prices, prompted record production and “fostered a considerable rise in unofficial inflows” from neighboring countries, the FAO said in the report. An estimated 750,000 tons in unofficial shipments was moved in, up from 400,000 tons a year earlier, it said.
The FAO’s stockpiles forecast compares with a Jan. 30 estimate from the Thai Rice Exporters Association, which put milled holdings at 17 million tons. Global shipments in 2012-2013 may total 37.725 tons, according to the USDA.
Thailand’s government, led by Prime Minister Yingluck Shinawatra, started buying from farmers at above-market rates in October 2011 to lift domestic prices and rural incomes. Commerce Minister Boonsong Teriyapirom said in August that the program was supported by 99 out of 100 people. Yingluck’s rice-buying program is similar to one implemented by Thaksin, her brother.
Thai rice shipments plunged 37 percent to 6.73 million tons last year, the Ministry of Commerce said on Jan. 23. That’s the lowest level since 2000, according to USDA data, and dethroned Thailand as the world’s biggest exporter.
This year “shipments from Thailand are anticipated to rebound, mostly on the expectation of releases of supplies from public inventories, which could even bring the country back into the leading rice-exporter position,” the FAO said. Exports may increase to 7.7 million tons, according to the report.
Milled output in Thailand will climb to a record 25 million tons in 2012-2013, from 23.4 million tons a year earlier, after farmers expanded plantings encouraged by the government’s buying program, the FAO said. That’s bigger than the 20.5 million tons predicted by the USDA on Jan. 11.
Former Prime Minister Thaksin said that the program reaps economic gains that are about three times the cost, according to an interview in September. According to the World Bank, the total cost may be as much as 440 billion baht ($14.8 billion) in 2012-2013, compared with 376 billion baht or about 3.4 percent of gross domestic product the previous year.