Indian Rice Imports to Cause ‘Major Swing’ in Trade

By Luzi Ann Javier and Zeb Eckert

Nov. 20 (Bloomberg) -- Indian rice imports next year will create a “fairly major swing” in global trade and push prices higher, commodities supplier Olam International Ltd. said.

The South Asian nation may import 2 million to 3 million metric tons, Sunny Verghese, chief executive officer of Singapore-based Olam, which trades commodities including rice, coffee and sugar, said today. India will export 1.5 million tons next year, compared with an average of 4.5 million tons from 2002 to 2008, according to U.S. Department of Agriculture figures.

Recent floods in the country’s south may slash the next harvest, which starts in January, pushing imports to as high as 5 million tons, Tejinder Narang, a commodities analyst and former director of PEC Ltd., an Indian state-owned agricultural trader, said in a phone interview from New Delhi today.

A swing from 4.5 million tons of exports to as much as 3 million tons of imports can have “a very important effect on the price direction,” Verghese said in a Bloomberg Television interview. “Prices are likely to firm given these latest developments.”

Prices may also extend gains if a “strong” El Nino weather phenomenon, which is forming in the Pacific and can parch crops in Asia, affects producing countries, Verghese said.

Import Surge

India hasn’t been a net rice importer for two decades, while the Philippines may buy a record 2.45 million tons in tenders for 2010 supplies before the end of the year, boosting competition for supplies and driving prices higher. The global rice trade is estimated to be 29.5 million tons next year, according to the USDA.

The regional benchmark export price for 100 percent grade-B Thai rice has gained 6.9 percent to $561 from this year’s low of $525 in October. It reached a record $1,038 a ton in May 2008 as concerns over supply shortages prompted countries including India and Vietnam to curb exports, sparking food price riots across the globe.

India, the world’s second-largest grower and consumer of rice, lost 18 percent of its crop to drought and is in talks with Thailand and Vietnam, the two biggest exporters, to buy rice, Farm Minister Anand Sharma said Nov. 17. India is seeking as much as 2 million tons of rice, Thailand’s Prime Minister Abhisit Vejjajiva said Nov. 18.

India’s total rice harvest may drop to 69.45 million tons, from a record 84.58 million tons last year, the farm ministry has said.

The country’s next harvest, which begins in January, may plunge to 12 million tons, from 15 million tons a year earlier, Narang said.

That could lower the nation’s stockpiles to a “critical level” of 950,000 tons by October 2010, equal to just four days of the nation’s needs, if the government decides not to import, he said.

Indian government policy requires state food agencies to maintain a total stockpile of 5.2 million tons to ensure the nation’s food security, Narang said.

To contact the reporters on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net; Zeb Eckert in Hong Kong at zeckert1@bloomberg.net