Flooding in Thailand all but paralysed the rice trade this week and delays to shipments are likely to continue, giving would-be buyers even more incentive to turn to India, which has returned to the export market and offers far lower prices.
The shipment of at least 100,000 tonnes has been delayed in Thailand because of the flooding and the curtailment of activity on the swollen river running through Bangkok, according to the Thai Rice Exporters Association on Wednesday. "Operations along the Chao Phraya have completely stopped as the authorities won't allow any traffic on the river due to the high water level," said the association's president, Korbsook Iamsuri.
"Shipments are being delayed longer than expected, anything from a few weeks to a month. However, there should be no default," she added. Floods have hit Thailand since the end of July, first in northern areas, then from September in the centre where a lot of rice is grown, and now threatening Bangkok.
Benchmark 100 percent B grade Thai white rice was offered at $630 a tonne on Wednesday, up from last week's $610 a tonne, with supply problems and the government's new intervention scheme playing a part. "That was an artificial offer price, pushed up by intervention and limited domestic supply, not because of strong demand as buyers are now switching to Indian rice," said a Bangkok-based trader.
The Indian government, which had banned exports for almost four years, authorised shipments of up to 2 million tonnes of non-basmati rice from September and traders said its grain was offered at $460-$470 a tonne, well below both Thai and Vietnamese prices. Given that discrepancy, some traders say shipments from Thailand, the world's biggest exporter at the moment, could fall as much as 30 percent next year from the roughly 10 million tonnes that had been expected this year until the floods.
In Vietnam, the second-biggest exporter, prices were barely changed this week in thin trade. Its 5 percent broken rice dipped to $570-$580 a tonne, free on board, from $575-$585 last Wednesday. Once the flooding has receded, Thai prices will remain high because of the intervention scheme, traders said.
The government started buying unmilled rice from farmers at 15,000 baht ($486) a tonne from October 7 and some traders say it could end up buying the bulk of the main crop. Before the flooding, the government had forecast a crop of 25.1 million tonnes. It now says it could be around 18 million tonnes; some traders say closer to 21 million tonnes but the extent of crop damage is still unclear.
Only around 115,000 tonnes of rice has been purchased so far under the intervention scheme as buying procedures and logistics have been completely disrupted by the floods. Domestic paddy on the open market was quoted at between 8,700 and 9,800 baht a tonne by the Ministry of Commerce, which surveys the country's major rice areas.
It was unclear how much trade was done at those levels, but some farmers probably have little option. Many live from hand to mouth and can't afford to wait for transport to the official buying centres, especially if their rice is already in danger from high humidity.
Crop damage is likely to provide additional support to Thai prices once the market gets back to normal, along with the government scheme, traders said. "After the flood receded, we believe the government will run at full stream to buy rice in an effort to support farmers, which means its intervention will then have a bigger impact on the market, pushing prices higher," Korbsook said.
Comments
Comments are closed.