Rice price on the ice

When food prices were sky rocketing in the past few months, and fears of an impending food crisis had FAO officials biting their nails, the only saving grace had been rice. Prices of the commodity had been depicting a declining trend since January 2011, after witnessing increases in the latter half of CY2010.
The latest rice price index released by the FAO shows that rice prices maintained the trend in May 2011, with the price index standing equal to the previous month at 245, while FAOs food outlook indicates that rice prices are nowhere close to revisiting the highs seen during the latter half of 2010.
Large supplies from major exporting countries such as Thailand and Vietnam helped depress rice prices, while world rice production in 2011 is also expected to be higher. While the FAO predicts an increase of 2.6 percent to 476 million tons, the USDA also forecasts a growth in world paddy production by 1.5 percent to nearly 458 million tons.
Consequently, export availability is also expected to remain higher in 2011, with the USDA forecasting exports at over 32 million tons in 2011/12 relative to nearly 31 million tons in 2010/11.
In Pakistan, rice production is expected to recover come FY12, overcoming the impact of the floods that destroyed a significant portion of the rice crop in FY11. The USDA sees Pakistans rice production rebounding to 6.8 million tons in FY12 - the levels witnessed in FY10.
Thanks to an improvement in the expected rice output, exports from Pakistan are also seen rising to nearly 3.2 million tons from 2.5 million tons in the coming fiscal year, according to the USDA.
However, while rice exports from Pakistan are likely to witness an increase in quantitative terms, falling rice prices will contain the joy of domestic exporters. According to last available FBS data, average per ton price of rice (average of both Basmati and other category) has been falling since February 2011.
Even FAOs recorded prices of Pakistani rice have depicted a downtrend, with the Basmati category falling to $1025 per ton in May 2011 after staying at $1150 since December 2010.
While rising rice prices played their part propping up Pakistans current account in FY11, expected falling prices in the coming fiscal year do not bode as well for FY12. Yet a rise in export volumes, thanks to a promising production outlook, may prop up the overall value of exports. The extent of this increase remains to be seen as the year unfolds.