The Hindu Business Line : Global rice trade seen affected by rising prices

RISING prices and higher ocean freight costs have combined to result in a possible reduction of up to 10 per cent in world rice trade in 2004, with the contraction reflecting smaller shipments from exporters like India as well as cut in purchases by traditional importers.

However, international prices, which in the last several months had firmed up, have the potential to move further up should China decide to intensify its purchases. The country's new crop will not be out before June. Lifting of export restrictions by India and Myanmar may possibly help mitigate the price spike.

After reaching a record high of 28 million tonnes (mt) in calendar year 2002 and 2003, world trade in fine cereals is expected to decline by 2.5 mt to 25.5 mt this year, according to the Food and Agriculture Organisation (FAO) which attributed the lowering of the 2004 forecast mainly to worsening of export prospects for China and India, which more than offset some upward revisions for Thailand, the US and others.

China's rice exports this year are expected to be down to 1.5 mt (2.6 mt in 2003) following recent surge in domestic prices because of increasing tightening of supplies. Rice exports from the country are subject to Government monopoly.

Commenting on exports from India, the FAO said steps had already been taken by the Food Corporation of India (FCI) to temporarily suspend sales, pending assessment of buffer stocks that were heavily depleted in the last two years. Logistical transportation problems due to shortage of railway wagons also contributed to the suspension of exports.

Rice exports from India are currently projected at 2.5 mt, down from 4.4 mt in 2003.

On the import side, major Asian importer Indonesia is expected to reduce purchases by one-third to 2 mt because of import restrictions. Bangladesh too is set to import a million tonne less than last year's 1.6 mt because of excellent harvest late last season.

These reductions will, however, be partly offset by an increase in purchase by China to 1.4 mt (0.4 mt) because of strong domestic prices. Indeed, based on its WTO obligation, the country's rice import quota this year should be 5.3 mt.

FAO's first forecast of global paddy production in 2004 is set at a new high of 613 mt, 22 mt more than last year. Much of the increase is likely to happen in Asia, especially in China and India, and to a lesser extent in Pakistan, Thailand and Korea.

"The (production) figure is highly tentative since countries in the northern hemisphere still have to plant their main crops," FAO cautioned adding that the outlook for southern hemisphere crop was positive.

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