No respite from rice price surge

Bangkok: The sense of crisis over rice showed no signs of easing yesterday as the price of the world's benchmark jumped 10 per cent in just one week, fanning fears that millions across Asia will struggle to afford their staple food.

In a clear sign of the strain on output after major exporters began to curb exports earlier this year, a tender from the Philippines, the world's top importer, attracted offers to sell only about two-thirds of the half-a-million tonnes it sought.

In Bangkok, Thai 100 per cent B grade white rice, considered the world's benchmark, hit $950 per tonne, free on board, three times its price at the start of 2007.

US rice futures surged 2 per cent on the Chicago Board of Trade to a record high for the third straight session.

"There's been a popular misconception that the world can produce as much food as it likes. Well, it obviously can't. And Asia can't feed itself at the moment," Gerry Lawson, chairman of major Australian rice producer Sunrice, said.

The unprecedented surge, which some analysts said is only going to continue, posed a growing threat to regional governments worried about the prospect of hoarding and social unrest.

Policy challenge

Policymakers are grappling with the impact on inflation of the soaring cost of food, which is combining with oil prices at record levels of $115 a barrel.

Governments in top producer countries such as Thailand and number two exporter Vietnam are urging farmers to grow extra crops, although it will be several months before the additional supply hits the market.

Meanwhile, demand from other big importers such as Iran, which is expected to try to buy up to one million tonnes of Thai rice this year, will keep the upward pressure on prices, analysts said.

"There will be Iran, Japan and another round of tenders in the Philippines which will help boost prices," said Paka-on Tipayatanadaja, a rice market analyst at Bangkok's Kasikorn Research Centre.

"I'm sure we will not see Thai rice prices at $300 a tonne again."

The Philippines, where rice supplies have become a hot political issue, received offers in its latest tender between $872.50 and $1,220 a tonne, sharply higher than the just over $700 it paid in March.

As a measure of the seriousness of the problem, Manila has temporarily halted conversion of agricultural land for property development, hoping to ring-fence paddy fields to meet the food needs of the country's 88 million people.

Soldiers armed with M-16 rifles guard sales of subsidised rice by the state National Food Authority and the government has filed charges against 13 people suspected of hoarding.

Many Thai farmers are planting an additional crop to meet demand although some are holding back due to concerns about the rising costs of fuel and fertiliser and the inability of ordinary farmers to get access to the elevated market prices.

Farmers in Vietnam say they have planted a special variety of rice for their summer crop, hoping it will hit the market in mid-June, a month earlier than normal.

For the time being in Thailand, which accounts for nearly a third of world exports, prices of all grades are only going in one direction.

Thai 100 per cent parboiled rice was sold at $960 per tonne to African countries for May and June shipment, while Thai 100 per cent premium grade fragrant rice was sold at $1,200 per tonne to Hong Kong and US importers, traders said.

"There was strong demand for parboiled rice and also white rice and we expected buyers to buy more," Korbsook Iamsuri, secretary-general of the Thai Rice Exporters Association, said.

In a clear sign of the strain on rice supplies after major exporters began to curb exports earlier this year, a tender from the world's top importer the Philippines attracted offers to sell only about two-thirds of the amount it was seeking.

"Everybody should realise that there will no longer be any cheap rice," Chareon Laothamatas, managing director of Uthai Produce Co. Ltd., a leading exporter of premium grade fragrant rice, said.