Rice prices ebbing off

There have been mix-and-match reactions of commodity, forex, and financial markets to the destructive tsunami in Japan. In the middle of the panic, many had laid their fears on the global rice market too.
Commodity Online - an India-based website covering global commodities market - expressed analysts fears about a drop in Japans rice output since many rice fields were affected by the unwelcome waves. And because of expectations of imports from Japan, many conjectured global rice prices to rise.
But Concepcion Calpe, senior economist at the UN Food & Agriculture Organization, allayed these fears on the back of sufficient rice stocks of roughly 2.8 million tons, which is over 34 percent of Japans estimated consumption in 2011.
The fears are dispelled further as Ben Savage, the managing director for rice at the Jackson Son & Company in London, one of the worlds oldest rice brokerage houses, highlighted the tolerance of rice paddy fields to temporary influx of saltwater.
Overall, higher estimates of global stockpiles in 2011, released by the United States Department of Agriculture (USDA) recently, look promising for the global market. Global inventory forecasts were raised by over 5 percent to about 99 million tons.
Even the FAO seems calm about the rice outlook as it says, "The refurbishing of rice inventories is expected to lift the global stock-to-use ratio from 29.1 percent in 2010 to 29.7 percent in 2011."
The ample supply of the commodity in the market spells a southward journey for international rice prices. From 257 in November 2010, the FAO rice price index has been on a downward trajectory, having fallen to 252 in February 2011.
For Pakistan, USDAs rice production forecasts for 2011 have been brought down from 6.8 million tons in 2010 to 5 million tons - a decline of about 26 percent - on account of crop losses after the floods. Exporters, however, are looking at harvests hovering around 6 million tons.
There are also forecasts of lower rice exports from Pakistan in 2011, down by about 34 percent from 4 million tons in 2010.
In fact, Pakistans rice exports during July-February FY11 fell 16 percent to 2.38 million tons over the same period last year.
In the midst of fears that the export target of 4 million tons set for the year may not be reached due to post-flood crop losses, declining international prices may further discourage exporters.
"Our top 10 exporters are now concentrating on wheat instead of rice as they are getting good profits there," Rice Exporters Association of Pakistan chairman, Irfan Ahmed Sheikh, was quoted on Reuters last week.
Therefore, rice, which has an average weight of about 15 percent in Pakistans total exports, may lose some glory in Pakistans export portfolio for FY11.

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Rice estimates            tons(mn)

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World exports                 30.2

Pakistan exports               2.7

World production             451.5

Pakistan production            5.0

World consumption            447.0

World ending stocks           98.8

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Source: USDA