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IRRI Says India May Import Rice, Fueling ‘Panic’ !

October 31, 2009

This is looking like the repeat of early 2008 when the price of rice escalated. 2009 has been a bust for farmers. The world is suffering from massive drought and inconsistent rainfall. With global grain stocks at dangerously low-level, this can result in global famine starting in Q2 2010. Bloomberg reports :India, the world’s second-largest rice grower, may become a net importer for the first time in 21 years in 2010, potentially sparking the kind of “panic” that sent prices to records in 2008, an agricultural economist said.  India may import as much as 3 million metric tons next year after the wet season harvest plunged, Samarendu Mohanty, a senior economist at the International Rice Research Institute, said in an interview. Those would be the imports since 2006, according to U.S. Department of Agriculture data.

Food price protests swept the globe from Bangladesh to Haiti last year after fears of shortages prompted producers including India to cut rice exports and importers increased purchases to secure supplies, sending prices to a record. “India can start it again,” Mohanty, author of “Financial Volatility in Agricultural Trade” published in 2002, said yesterday in an interview in Cebu, central Philippines. “If rice prices rise, there will be civil unrest in many countries.”

Rice for January delivery gained 0.5 percent to $14.255 per 100 pounds on the Chicago Board of Trade as of 4:18 p.m. in Singapore, extending yesterday’s 3 percent jump. The price reached a record $25.07 in April 2008. India’s wet season harvest, which accounts for 80 percent of total output, may slump as much as 24 percent to 65 million tons, from 85 million a year ago, said Mohanty.

Stockpile Drop
The nation is forecast to continue exporting higher-priced basmati rice, with shipments of up to 2.5 million tons, Mohanty said. Each year, the government sells 20 million tons of non- basmati rice at subsidized prices to about 65 million poor families, Mohanty said.

A drop in India’s production after the weakest monsoon since 1972 may cause stockpiles in the world’s five largest exporters to plunge by a third to 20 million tons in the year ending Sept. 2010, the lowest level in five years, Concepcion Calpe, senior economist at the United Nations Food and Agriculture Organization, said Oct. 9.

“The Indian government can’t afford to have a very low stockpile of rice next year in case another drought or flooding hurts crops,” Rakesh Singh, head trader at Emmsons International Ltd., which supplies about 500,000 tons a year in India, said yesterday. “We may hear about a tender in the next few weeks.”

Tight Situation
The supply situation “is very tight,” Mohanty said. “It depends on how the country reacts, whether there’s a panic in India or the Philippines. Those are the problem countries right now that can tilt the market one way or the other.”

The Philippines may boost purchases to 2 million tons in 2010, from 1.78 million tons this year, after storms damaged crops, the National Food Authority said Oct. 9. The Southeast Asian nation is bringing forward imports for 2010 after the losses, National Food Administrator Jessup Navarro said Oct. 26.

Crop losses may help push rice prices back to record levels, Philippine Agriculture Secretary Arthur Yap and the U.S. Rice Producers Association President Dwight Roberts said yesterday. “We are not very far from another rerun of 2008 prices,” Yap said. Still, India has no plans to import rice because reserves are adequate, Nanda Kumar, the country’s farm secretary, said in New Delhi on Oct. 27.

Duty Scrapped
“They can survive without imports, if they decide to do so, but there are risks involved,” Mohanty said. “If they have a drought next year, they have to import.” India’s Central Board of Excise and Customs scrapped the 70 percent import tax on rice through September 2010 to boost domestic supply after the crop losses, the Press Trust of India reported Oct. 27, citing an unnamed official.

India’s trade ministry and customs authorities said they have yet to receive notification of the decision. The country’s return to the import market would push Thai rice export prices, the regional benchmark, to $800 a ton, Emmsons’ Singh said. That compares with this week’s price For 100 percent grade-B Thai white rice of $525, and the May 2008 record of $1,038.

“Thailand is not in a hurry to sell at all because they know the market isn’t going to go down,” Mohanty said. “The market is most likely to go up.” The Thai government aims to export more than 2 million metric tons of rice next year under a government-to-government sales program, Commerce Minister Porntiva Nakasai said today.

“Demand from India and the Philippines would help boost exports,” Porntiva said in Bangkok, without giving a total for the state sales program this year.

‘Huge Stockpile’
To be sure, India “has a huge stockpile of rice that’s way above the buffer norms and I don’t expect any imports,” Atul Chaturvedi, president at Adani Enterprises Ltd., India’s biggest private trader of farm goods, said today. “The decision to abolish the import duty may be just a precautionary step.”

Rice output in Uruguay, Brazil and Argentina, South America’s three largest exporters, is likely to drop 5 percent in 2009-2010 after drought cut water levels, Bruno Lanfranco, senior researcher at the National Agriculture Research Institute of Uruguay, said today. Brazil’s imports will rise to 900,000 tons in the marketing year 2009-2010, from 800,000 tons a year earlier, he added.

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