Thai rice prices up to two-year high as drought cut output

Thai rice prices surged this week to a two-year high as drought cut output in Asia's top growers, which also boosted Vietnamese grain prices and kept buying demand thin, traders said on Wednesday. Prices in Thailand, the world's second biggest rice exporter after India, hit their highest level since May 2014, ahead of the government's plan to reduce its massive stockpiles.
"This situation is due to drought, lesser output, and many crops were unable to grow," said Kiattisak Kallayasirivat, a Bangkok-based director at Ascend Commodities-SA. "It is almost mid-year now, so the demand has arrived, but with fewer supply or shipments arriving, millers and exporters are rushing to buy rice," he told Reuters. This week, Thai 5-percent broken rice rose to $418-$420 a tonne, free-on-board (FOB) Bangkok, the highest since May 11, 2014, from $398-$400 a tonne a week ago.
Kiattisak sees the price rising to $500 a tonne over the next two months. Despite the price hike, small orders were coming in while exporters have kept stocks ready for loading, another rice trader said. Thai rice meant for exports, using old-crop grain, is still being offered at a discount of around $20 a tonne to Vietnamese rice of the same grade, making it more competitive, traders in Vietnam said. "Prices in Vietnam have risen a bit in line with higher prices in the region, while there is no fresh buying demand," said a trader at a foreign firm in Ho Chi Minh City.
Demand in Southeast Asia will also ease as the new Philippine administration will bar private traders from importing rice, traders in Vietnam said. Supply remained thin as harvesting of the summer-autumn crop in Vietnam's Mekong Delta will begin in July, while stocks of the better-quality winter-spring rice have thinned, traders said.
Vietnam's 5-percent broken rice, using winter-spring grain, rose to $380-$385 a tonne, FOB Saigon Port for outright shipment, while the grade also stood at $370-$375 a tonne for July/August loading, with the new summer-autumn grain blended. At $385 a tonne, the price is the highest since April 20, according to Thomson Reuters data. Last week, the grade stood at $370-$375 a tonne. "African buyers are not looking at Vietnamese rice because of its high price, while they may prefer Indian or Pakistani grain," another trader in Ho Chi Minh City said.