Bumper rice harvest will ease prices, says FAO

By Jess Halliday

- Last updated on GMT

Related tags Rice Agriculture

The rice shortages of last year look to be at an end, as farmers upped production this year to ease the tight supply situation, according to the latest market data from the Food and Agriculture Organization.

The rice harvest comes to an end in May, when the Asian northern hemisphere harvests are in. Global paddy production is predicted to be 3.5 per cent higher than last year, at 683 million tons – the highest growth rate for the last three years, according to the February Rice Market Monitor​.

The benchmark Thai white 100 per cent rice cost $963 a tonne at its peak last year. By January 2009 it had fallen to $611 – but this was still 80 per cent higher than in January 2008, when it was at $311.

“One positive effect of the high rice prices in 2008 was that farmers and governments took up the challenges and opportunities and planted more, boosting production despite high fuel and fertilizer costs and a scarcity of quality seed,” ​said senior economist Concepcion Calpe.

Calpe predicted last April that a small reduction in prices could be seen with the new harvest, but warned that it could be two or three years before prices sank back to pre-2008 levels.

The FAO report says most of the rice production gain will be in Asia, with large and small countries seeing good harvests.

In Africa, rice production is also expected to rise by 18 per cent, as a result of government support and use of new, more resilient and high-yielding seed varieties.

The impact was seen by food manufacturers and rice-dependent ingredients firms around the world, as well as in consumer price increases in the West. Rice is increasingly seen as an alternative to wheat, and sales of wheat-free breads and cakes to consumers wishing or needing to avoid gluten have soared in recent years.

However the most serious effects were on the world’s poorest people, with rice-related rioting in some countries, such as the Philippines, where rice is a staple food.

While some governments had to intervene to keep rice prices affordable, the FAO predicts that they may have to intervene again in 2009 – this time to sustain rice producer prices while, at the same time, protecting purchasing power.

Stocks and trade

Reserve stocks of rice are expected to rebound on the back of the new harvest to 118 million tons (in milled rice equivalent), the highest level since 2002.

Most of the stock increases are likely to be among exporting countries.

Rice imports to Africa are expected to fall to a five year low, as a result of good local paddy crop.

For exporters, the price drop to below $400 per ton of top quality rice could be problematic, and adversely affect producers. It may also affect policies that are geared towards self-sufficiency in importing countries.

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