Rice glut expands with farms poised for record crop

Yingluck’s Pledge

Stockpiles in Thailand, set to become the biggest exporter this year, jumped after Prime Minister Yingluck Shinawatra started buying from farmers in 2011, fulfilling an election pledge to boost rural incomes. The program may cost as much as 440 billion baht ($14.8 billion) this season compared with 376 billion baht, or about 3.4% of gross domestic product, a year earlier, the World Bank estimates.

“Thailand will have to get rid of the surplus in the next few months to be able to continue the program and purchase rice again,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute, a group based in the Philippines. “Thailand cannot continue to hold these stocks for a long time due to quality issues and also the space.”

The country is seeking to reduce reserves by selling 7 million tons to foreign governments including China, Permanent Secretary for Commerce Vatchari Vimooktayon said in January.

The government may also build more warehouses and increase borrowing to sustain its program without being forced to reduce rates to match competitors’ prices, said Kiattisak Kanlayasirivat, a Bangkok-based director with Novel Commodities SA, which trades about $600 million of rice a year.

China, India

In the U.S., the fifth-biggest exporter, farmers will sow 2% less as they shift to more profitable crops, the USDA said Feb. 22. Rough-rice futures traded in Chicago climbed 8.4% in the past year, helped by purchases of higher quality grain by the European Union and Africa. U.S. export sales rose to 2.42 million tons as of Feb. 21 from 2.09 million tons a year earlier, government data show. Domestic inventories will fall to the lowest level in five years, the USDA says.

China, the top consumer, may increase imports because foreign rice is cheaper than the home-grown variety, the state- owned China National Grain & Oils Information Center said Feb. 1. Purchases rose fourfold to 2.4 million tons last year from about 600,000 tons in 2011, customs data show. Shipments from India, the largest supplier in 2012, will drop 18% to 7.5 million tons this year, the FAO said.

Nigeria Purchases

Demand elsewhere is declining. Purchases by Nigeria, the world’s biggest importer, will drop to 2.9 million tons in 2012-2013 from a record 3.2 million tons a year earlier, USDA data show. In the Philippines, the largest buyer until 2010, the crop may exceed consumption and spur exports by the end of the year, President Benigno Aquino said Jan. 25.

“There’s just too much supply in the market and I don’t see any buyers around except China,” said Rakesh Singh, a New Delhi-based trader at Emmsons International Ltd., who has traded the grain since 1993. “Global producers, except India, are looking at a bumper crop and that’s pressuring prices.”

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