Business Times

Rice shortages expected next year, prices already heading up

A h report by HSBC global Research says rice prices have jumped by over 25% in recent months, on supply fears for next year. The research report, titled ‘What’s cooking with rice?,’ dated 30 November 2009, notes that the countries most at risk in Asia from rising food price inflation are Sri Lanka, India, the Philippines, Indonesia, Thailand, and Vietnam.

The reason for the rising rice prices is mainly the supply shortage from the Philippines.
“The Philippines, easily one of the largest global rice importers (likely to purchase some 10% of international shipments over the coming year), had severe production shortages due to typhoon damage and has started to place record tenders to prevent a squeeze next year,” said the report.

Other factors are adding to the pot

“India, for several years now an exporter of rice, looks set to be an importer of the stuff next year as the current drought hampered production (down about 18%),” said the report. Meanwhile, the US Department of Agriculture (USDA) has forecast that global rice production next year will be below global demand for the first time in five years, even as stocks among the major exports are running about 20% below normal.

HSBC Global Research says things can actually get worse. “Also, El Nino is sweeping through the region again next year, a phenomenon that has disrupted output in the past. As a result, rough rice futures, traded in the US, have increased by some 25% in recent months. And rice is not the only headache: other agricultural commodities, such as sugar, cocoa, tea, and, not to be dismissed, Chinese garlic, have had an even more impressive run,” said the report.

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