Asia rice prices dip as India, Vietnam race for markets

• Prices drop further for all origins on thin demand
• Thailand can’t compete at current prices
• India offers at much lower prices as rupee eases
• CRISIL sees India share of rice trade tripling in 2011/12

BANGKOK (Reuters): Intensifying competition between Vietnam and India for a bigger share of the rice market made available by the drop in costlier Thai exports have pushed prices down around Asia.

This is good news for billions of consumers of the staple across Asia, the Middle East and Africa, as global food prices eased last month but held at high levels with further scope to rise on future supply concerns, the United Nations’ food agency said.

In Thailand, where a state stockpile and market support scheme aimed at helping farmers had driven up export prices since October, levels are starting to dip as importers turn to Vietnam and South Asia for cheaper rice from bumper harvests.

Poor Thai farmers in urgent need of cash are also selling to millers at prices way below those offered by the government.

“That helps Thai exporters offer at prices slightly lower than last week, but it’s still not competitive, compared to India and Vietnam,” said a Bangkok-based trader.

Benchmark 100 percent B grade Thai white rice fell to $590 per tonne, free on board (FOB) basis, from last week’s $610, traders said on Wednesday.

This was down from a peak of $650 a tonne on Oct. 5, just ahead of the government plan to buy every single grain of rice at 15,000 baht ($480) a tonne under the intervention scheme.

Thai 5 percent broken grade white rice fell to $580 per tonne, down from $595 last week.

In contrast, Vietnam’s top export-grade 5 percent broken rice dropped to the lowest in more than five months at $490-$495 a tonne, FOB, down further from last week’s $520-$550.

Vietnam’s competitive prices versus Thailand have helped it grab the Malaysian market with the sale of 300,000 tonnes of rice in 2012, allowing it to maintain overall market share in the face of pressure from India and Pakistan.

“Exporters are lowering offer prices not because they want to export more but because of rising pressure (of supply) ahead of the next harvest,” a trader in Ho Chi Minh City said.

Output from the major winter-spring crop in the Mekong Delta is projected to rise 3.8 percent from this year to 11 million tonnes.

Vietnam, the world’s No. 2 rice exporter, shipped 6.8 million tonnes of rice in the first 11 months of 2011 and annual shipments could hit a record of 7.2 million tonnes, as about 400,000 tonnes are set to be loaded this month, traders said.

But high stocks that have allowed India to export 2 million tonnes since September -- the first since a shipment ban in 2007 -- and its weak currency, have kept Indian rice far below prices in Vietnam.

“Indian rice prices have eased $40-$50 per tonne since exports were allowed,” said a trader in New Delhi.

Common grade non-basmati rice are offered between $380 and $415 a tonne, FOB, down from last week’s $430-$450.

The Indian rupee touched a record low this week as foreign and domestic investors snapped up dollars to reduce exposure to India’s cooling economy. It has shed 4.8 percent against the dollar in the past four weeks and 16 percent this year.

“Prices have almost bottomed out due to the fall in the rupee’s value. There is no room for Indian rice prices to ease further, unless the rupee slides further,” said Prasoon Mathur, a senior analyst with Religare Commodities.

The world’s second-biggest rice producer is sitting on huge stockpiles of 27.1 million tonnes in government warehouses as of Dec. 1, against a target of 5.2 million tonnes and is set for a bumper harvest for the second year in a row.

Credit Rating Information Service of India (CRISIL) said in a report that India’s share of global rice trade may triple to 21 percent in 2011-12 from 7 percent in 2010-11.

“We expect India’s rice exports to reach around 7 million tonnes in 2011-12, up from 2.2 million tonnes in 2010-11,” said Gurpreet Chhatwal, Director, CRISIL Ratings. “The lifting of the ban may translate into additional $2 billion in export revenue for India’s rice millers and exporters in 2011-12.”

India used to be the second-biggest rice exporter before the export ban.

“India can offer at lower than $450 a tonne, so we can say that Thailand is now out of the market as Thai offers are just offers on paper that no one is interested in buying,” said Kiattisak Kalayasirivat, a trader with Novel Agritrade.

Thailand is currently harvesting its main crop, adding to the downward pressure on prices despite support from the new government that was elected in July on a populist platform that included guaranteed high prices for farmers.

The government has bought 2.4 million tonnes of paddy from farmers since the scheme began on Oct. 7. It holds another 2.0 million tonnes of milled rice bought from farmers in previous crops, which it wants to release soon.

Concerns over its depleting market and industry warning that rice shipments from the world’s top exporter next year could halve to around 5 million tonnes, may have prompted the Thai government to resume talks with Indonesia for a government-to-government sale of at least 300,000 tonnes.

But a dispute over price means that the deal has yet to be sealed, a senior Thai government official said.

Uncompetitive prices and transport disruptions due to the worst floods in decades, have limited Thai rice exports in November at 491,000 tonnes, just above half the amount in the same month last year at 954,000 tonnes, commerce ministry data show.

Thai exporters have even started to buy cheaper rice from India and Pakistan to meet its export commitments.