The price of rice will rise to US$700 per tonne next year even though India has returned to the market, according to the CEO of The Rice Trader, a leading trade publication and analyst of the global rice industry.
HCM CITY —
Farmers harvest rice in Quang Tri Province's Hai Lang District. The price of rice may jump next year. — VNA/VNS Photo Ho Cau
Speaking at the World Rice Conference in HCM City yesterday, Jeremy Zwinger said prices would go up because of increased flooding, a 15 per cent drop in production in South America, and Thailand's decision to buy unmilled grain at 15,000 baht ($500) a tonne to boost rural incomes.
Flooding will affect crops in Cambodia, Viet Nam, and especially Thailand.
The Thai price intervention in buying unmilled grain would push up prices on the market in 2012, he said.
In addition, with rice crops hit by natural disasters and stocks shrinking, the Philippines is expected to buy rice in December which will be shipped in January. Indonesia is also in need of more rice.
Cuba will likely buy rice from Viet Nam, according to Zwinger.
"If you look at the Thai minimum rice price right now at $750 per tonne, … the market can easily reach $700, even here," he said.
Thailand and Viet Nam have experienced dramatic growth in rice exports this year.
As of October 11, Thailand had exported 9.4 million tonnes of rice, up 45.16 per cent over last year. Viet Nam had exported 5.99 million tonnes, up 8.8 per cent.
India exported 2.13 million of rice, a year-on-year increase of 11.38 per cent.
The 2011-12 harvest in India is likely to send grain stocks soaring and hence pressure markets to allow exports.
Korbsook Iamsuri, president of the Thai Rice Exporters Association, said India's return to non-basmati rice exporting plus the Government's rice-pledge scheme would shrink the market share for Thai rice, especially for parboiled rice, since India offers a low price.
Thailand's parboiled rice enjoyed strong growth in South Africa this year, but with the return of Indian parboiled rice exports, Nigeria, Bangladesh and South Africa could substitute Indian for Thai rice, she said.
"I don't know how much market share the Thai rice will lose, but I hope that it is not substantial," she said.
Although affected by severe flooding, Thailand is not short of rice since 4 million tonnes of rice still remain in stock at enterprises, and nearly 1 million tonnes are in Government warehouses.
Zwinger said investment in food resources had not occurred at the level needed to keep up with population growth.
"Frankly, food has been undervalued and this undervaluation has led to the current price volatility."
Food commodities needed a high level of investment, even in Viet Nam and the Philippines, he said.
He recommended that rice traders keep a close eye on the rice market because of its volatility.
Speaking at the conference, Bui Ba Bong, deputy minister of Agriculture and Rural Development, said rice was the most important food crop in Viet Nam, representing the life and culture of the people.
The country has 4.1 million ha under rice cultivation, accounting for 44 per cent of total arable land, offering the main source of income for about 10 million households in rural areas.
In 1990 rice production in Viet Nam was only 19 million tonnes, but it increased to 40 million tonnes last year, despite a drop of 280,000ha of rice fields over the last 10 years.
The average rice yield has increased from 3.18 tonnes per ha in 1990 to 5.3 tonnes per ha in 2010, topping all ASEAN countries.
Viet Nam started to export rice in 1989 with more than 1 million tonnes.
The figure last year reached a peak of 6.8 million tonnes and this year, despite severe natural calamities, particularly floods, the country expects to export more than 7 million tonnes of rice.
However, the industry faces challenges, including a reduction in rice land due to industrialisation and urbanisation, a labour shortage, and effects from climate change.
To make the rice economy more profitable, the country would strictly control rice land use, sustain the growth of rice yields, and use technology to reduce post-harvest losses, Bong said.
Viet Nam is expected to have 3.8 million hectares of rice land by 2020, a reduction of 300,000ha from 2010.
The conversion of rice land to other uses should be strictly controlled, he said, adding that policies that help farmers should also be developed.
Moreover, a significant increase in investment for rice research and development would help consolidate the technological base for rice production.
He said new rice varieties would be needed to adapt to drought, salinity, water submergence, high temperatures and disease.
New rice crop management, for example GAP (good agriculture practices), should be used by all farmers to increase rice yield and quality and reduce production cost.
Bong said modernisation of rice production should be strengthened to reduce reliance on human resources and reduce post-harvest losses.
Rice export policies should ensure profitability for the country and farmers, and protect all stakeholders in the rice industry.
According to Government figures, Viet Nam expects to harvest 41.6 million tonnes of paddy this year, 1.5 million tonnes more than last year. — VNS