World rice trade set for somber season in 2001

World rice trade set for somber season in 2001

NUSA DUA, Bali (Reuters): Bumper rice paddies and lackluster demand are likely to set a somber tone in the global rice market in 2001 industry experts say.

Delegates at the Fifth Asia International Rice Conference expect these bearish fundamentals could push prices down by as much $30 per ton.

Tom Slayton, founder of U.S.-based consulting firm Slayton & Associates, expects world import demand to either equal this year's 22.2 million tons or increase by three million tons.

But that, he says, will not be enough to stimulate prices.

"...Prices are unlikely to rally...Should import demand fail to rise above 24 million tons, prices are likely to remain the same or fall due to abundant stocks in Thailand and Vietnam and excellent prospects for Thailand's main crop," Slayton said.

Mamadou Ciss, managing director of Geneva-based Ascot Commodities NV, has predicted a $20-$30 per ton drop in prices next year, compounded by India's plan to export 3.0 million tons.

And the world's number one and two exporters, Thailand and Vietnam, are expected to maintain big programs.

Slayton forecast Thailand to export 6.9 million tons, up from six million tons in 2000, and Vietnam to export at least 4.0 million tons.

Vietnamese delegates forecast 2001 exports to reach 3.8 million tons, virtually unchanged from 2000.

They said the impact of recent floods which delayed planting and affected crop quality, curbed any potential export growth.

And it is unlikely the market can look to the world's biggest importer, Indonesia, to absorb the commodity because much of its needs will be met through its bumper crop.

Slayton said the political climate in Thailand and China would cast some uncertainty over next year's rice trade.

He said Thailand's 2001 rice policy would not become clear until after January's general elections and China's impending entry to the World Trade Organization would impact its export subsidy program.

Delegates said rice trade houses would somehow have to adapt to the bearish conditions and possibly diversify their businesses.

"Increasingly, everyone in the trade, because of the tight margins... and due to excess production and bearish prices, will have to adapt," said Ashok Krishen, Vice President of Olam International Ltd.

"Prices are looking very bearish, so everyone in the chain is squeezed. To make more money, trading houses must be nimble and move up and down the chain."

Rakesh Sodhia, managing director of Thai-based commodities firm G. Premjee Ltd., suggested rice trading companies offer financing services.

"Trading companies like mine, we have to be more proactive, and we have to add value," Sodhia said.

Trading companies in rice exporting countries could either set up mills, process rice or assist buyers, he added.

He said G. Premjee Ltd. had taken on the role of an exporter with a parboiled rice mill in Vietnam.

Delegates agreed that in the increasingly deregulated market environment, with a burgeoning number of importers, trade houses should be willing to forge joint ventures with one another.

Africa, whose rice imports have doubled in the past decade, appears to be the only bright spot in a global market characterized by sagging demand.

Africa is forecast to buy 5.8 million tons this year up from 2.94 million tons in 1990.

"Africa's consumption will continue growing in line with its growing population," Ciss of Ascot said.

Krishen predicted Nigeria, Africa's biggest buyer, would import 1.2 million tons of rice this year, compared to 978,000 tons in 1999.

Krishen said Thailand had started to capitalize on the African market with exports likely to reach 2.3 million tons this year.

China is also cashing in on the growth market and is forecast to export 1.4 million tons in 2000.