Rice Prices May Return to Record Without Investment, IRRI Says

By Luzi Ann Javier

Nov. 25 (Bloomberg) -- Rice prices may return to last year’s record levels and the world will see repeated food shortages without investment to boost production, the International Rice Research Institute said.

“Rice prices are again approaching last year’s historic highs that caused social upheaval in some nations,” the Laguna, Philippines-based institute said in a statement today. “Once we get our productivity going, it will keep pace with demand,” IRRI Director General Robert Zeigler told reporters today.

Rice production has lagged behind demand in four of the past eight years and rising consumption is expected to erode global ending stockpiles by 41 percent to 85.9 million tons in the 2009-2010 marketing year, from a record 146.7 million tons in 2000-2001, according to the U.S. Department of Agriculture.

Rice futures have gained 37 percent from this year’s low of $11.195 per 100 pounds in Chicago on concern that crop losses from drought in India, the second-largest grower and consumer, and storms in the Philippines, the biggest importer, will cut global supplies.

Rough rice for January delivery gained for a third day, adding 0.3 percent to $15.315 per 100 pounds on the Chicago Board of Trade at 4:13 p.m. Singapore time.

Thai 100 percent grade-B white rice, Asia’s benchmark export price, was raised 5.3 percent to $590 a ton by the Thai Rice Exporters Association today. The price has gained 12 percent from this year’s low of $525 in October.

Without investments in agriculture “you will find increasing examples of 2008 repeating and extending,” Zeigler said in Singapore today. “You’ll find yourselves with global food shortages, you’ll find the world completely incapable of addressing the impact of climate change.”

Output Drop

Global output was forecast to drop 3 percent from a year earlier to 432 million tons in the 2009-2010 marketing year, resulting in a shortfall of 4.75 million tons, according to estimates by the USDA on Nov. 10.

Farmers are struggling to squeeze more crops from each acre while demand increases with a growing population. Limited growth in yields is “a major reason for the imbalance between long- term demand and supply,” according to the IRRI. Average annual yield growth slowed to 1.4 percent from 1990 to 2005, from 2.14 percent during the previous two decades, it said.

IRRI aims to raise $300 million in research funding over a five-year period to help develop higher-yielding rice varieties that will accelerate production growth and keep pace with the expansion in demand, Zeigler said.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net