There is enough rice in the global market to feed the world, but prices are soaring. What is the reason? You must be wondering.
Theoretically, there should be no rise in rice prices as the commodity is not facing any shortage and is in supply.
According to experts and exporters, record rice prices on the Chicago Board of Trade don't accurately reflect the global situation as supplies are adequate to meet short-term demand.
Market analysts said there is no immediate shortage of stocks, only a shortage of quotations (fewer bids) in anticipation of higher prices, because countries such as Thailand, Vietnam, Pakistan and the US are sitting on stockpiles of rice.
Another fact is that India's recent ban on rice exports was not the key driver behind the run up in prices as the country exported 5.1 million tonnes of rice in the October-January period. This is 2 million tonnes more than the entire marketing year to September.
Prices on CBOT reflect just 5 per cent-6 per cent of the global rice production, which is controlled by three major producing nations of Thailand, Vietnam and the US.
Global rice production totals around 419 million tonnes, of which 29 million tonnes to 30 million tonnes are traded, and the rest is locally consumed.
In a research note, Standard Chartered Bank said continuing concerns over exportable surpluses should keep rice prices above $20 per quintal for most of the year. Among the concerns are export restrictions that could potentially increase inflationary pressures in importing countries that have few substitutes for rice.
When the new crop arrives from Thailand it will exert downward pressure on prices. Experts said for specialty rice like Basmati and Jasmine, the tightness will continue as there is a physical shortage and demand is strong.
The non-Basmati segment may not witness a dramatic reduction in traded volumes. Another fact is that in the medium-to-long term governments' need to build up stocks will keep demand firm.
How much that will actually translate into buying activity remains to be seen as building stocks in the current high price environment doesn't make much sense.
