Rice prices rise as supply is constrained

9 May 2017

The price of rice from the world's two biggest exporters has risen sharply due to increased government purchases and poor harvests.

In India, the biggest exporter, the price of 5% broken parboiled rice rose by $7 to $394-$399 a tonne in the past month, according to the All India Rice Exporters Association. In the number two exporter, Thailand, 5% broken rice export prices rose to $380-$390 a tonne, from $360-$375.

M. Adishankar, executive director of Sri Lalitha, an exporter based in the southern state of Andhra Pradesh, told Times of India that the government had been buying up rice, leaving supply low for export.

“The government agencies are actively buying paddy … Supply is very limited for private players,” he said.

“This has pushed up paddy prices and accordingly we have to raise rice export prices.” 

The Indian government buys rice from local farmers at a fixed price for subsidised food inventories. In February the government announced it would increase procurement of rice and wheat to increase food security.

India mainly exports non-basmati rice to African countries and premier basmati rice to the Middle East.

In Thailand prices rose as exporters rushed to fill shipments amid a slow off-season harvest, according to the Thai Rice Exporters Association.

A Bangkok-based trader told Reuters: “It looks like exporters are scrambling to fulfil large orders previously received and now market supply is also running low.”

He added as long as exporters were still taking care of their orders, prices could rise higher.

Thailand exported 3.87m tonnes of rice in the year to 26 April, a 12% jump from the same period last year, according to figures from the Thailand's Ministry of Commerce

China, the main importer of Thai rice, accounts for 11% of exports, while the Philippines and Malaysia are the second and third largest customers, taking 5.3% and 4.4% respectively, according to the Observatory of Economic Complexity

Meanwhile, in Bangladesh flash floods have washed away crops in northeastern Bangladesh, which would have yielded nearly 700,000 metric tonnes of rice, according to estimates from the Ministry of Agriculture.

The fields hit by the floods were about to be harvested, a major blow to the country where reserves of the staple grain have dipped to a six-year low, resulting in massive price hikes.

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