As Asia’s rice crops shrivels, food security fears resurface
2 May 2016 | SINGAPORE – Nearly a decade after a spike in global food prices sent shockwaves around the world, Asia’s top rice producers are suffering from a blistering drought that threatens to cut output and boost prices of a staple for half the world’s population.
World rice production is expected to decline for the first time this year since 2010, as failing rains linked to an El Nino weather pattern cut crop yields in Asia’s rice bowl. A heat wave is sweeping top rice exporter India, while the No. 2 supplier Thailand is facing a second year of drought. Swathes of farmland in Vietnam, the third-biggest supplier, are also parched as irrigation fed by the Mekong river runs dry. The three account for more than 60% of the global rice trade of about 43 million tonnes.
“As of now we haven’t seen a large price reaction to hot and dry weather because we have had such significant surplus stocks in India and Thailand. But that can’t last forever,” said James Fell, an economist at the International Grains Council (IGC).
Rice inventories in the three top exporters are set to fall by about a third at the end of 2016 to 19 million tonnes, the biggest year-on-year drop since 2003, according to Reuters calculations based on US Department of Agriculture (USDA) data. Any big supply disruption can be extremely sensitive. In 2008, lower Asian rice output due to an El Nino prompted India to ban exports, sending global prices sky-rocketing and causing food riots in Haiti and panic measures in big importers such as the Philippines.
Manila at the time scrambled to crack down on hoarding, ordered troops to supervise subsidised rice sales and asked fast food chains to serve half-portions, as well as urging Vietnam and others to sell the country more rice. The world has suffered a series of food crises over the past decade involving a range of grains due to adverse weather. In the case of rice, benchmark Thai prices hit a record around US$1,000 a tonne in 2008. Price spikes like this typically also boost demand for other grains such as wheat, widely used for noodles in Asia, and soybeans and corn used for food or feed.
While currently far below 2008 highs, rice earlier this month hit US$389.50, the strongest since July and up 13% from an eight-year low of US$344 in September.
FIRST FALL IN WORLD CROP SEEN FOR 6 YEARS
Bruce Tolentino of the Philippines-based International Rice Research Institute is concerned about Asia’s vulnerability. “In general prices are still stable right now. They’re inching up though, and what will drive things over the edge will be a major calamity in one of the major producing countries.”
Although India’s rice output in 2015 was largely stable, extremely hot temperatures are threatening a second crop in eastern regions. Traders see further price gains by June as India’s next big crop is not due until September and Thailand’s main crop by year end. The IGC sees a 2016 world harvest of 473 million tonnes, down from 479 million tonnes in 2015 and the first decline in six years.
Thailand’s last main crop was only about half of the peak production a few years ago and the USDA has forecast output will drop by more than a fifth to 15.8 million tonnes this year. “The government has been asking farmers not to plant rice as there is little water in the reservoirs after two years of drought,” said one Bangkok-based trader.
In Vietnam, output could fall 1.5% this year to 44.5 million tonnes, while exports would be 8.7 million tonnes, steady on a previous projection, the government said. As much as 240,000ha of paddy have been destroyed by drought and salination in the central area and southern Mekong Delta region, it said.
A Singapore-based trader said that while the annual decline appeared modest, Vietnam’s latest harvest “is 5% to 6% lower than last year.” Thailand and Vietnam harvest three crops a year.
IMPORTERS ALSO SUFFER
Some Asian countries are already looking to raise imports. Indonesia is expected to see 2016 purchases jump by more than 60% to two million tonnes from a few years ago. China, the world’s top importer, taking about 5 million tonnes annually, is expected to continue this buying pace. IGC has forecast China’s 2016 production will fall short of consumption for a third consecutive year.
The Philippines had the lowest stocks since October in March despite importing 750,000 tonnes and its procurement agency has standby authority to ship an additional 500,000 tonnes.
“Although El Nino has entered its weakening stage, the risk of higher food prices remains given the onset of the summer season,” said Philippine Economic Planning Secretary Emmanuel Esguerra. – Reuters
Reproduced from The Star Business News Monday, 2 May 2016