El Nino risk, threatening grain production, could harden rice price

Many globally, are predicting El Nino, this year, meaning little water, threatening grain production and to push up grain prices.

Yingluck has been toppled from power and what remain, is a shadow of her government. Yingluck came to power on a number of populous policy, like a farm subsidy, that helped raise rice farmers income. hile globally, farm subsidy is common, for some reason, Yingluck’s farm subsidy was greatly attecked, locally and globally. Yingluck herself, stated that the subsidy is to help farmers and help stimulate the economy. She now face corruption charges for the loss the farm subsidy generated. Globally, if the same corruption charges were levy on politicians that support farm subsidy, the global prison system, will be filled with politicians.

So now, the Yingluck’s farm subsidy has ended, and farmers are back getting about 1/3 of the price of rice, they were getting, with Yingluck’s farm subsidy and there is no more, farm subsidy related economic stimulus.

The following is from the Rakyat Post (Source)

SINGAPORE, May 20:

THE rapid clearout of Thailand’s massive rice stocks could mean the end of rock bottom prices for the food staple, as China boosts purchases and a forecast El Nino weather event threatens production.

From 17 million tonnes at their peak – equal to nearly half of annual global rice exports – inventories are expected to fall back to a more manageable seven million tonnes by year-end as the government unwinds a ruinously expensive stockpiling scheme.

At the same time, weather forecasters increasingly see an El Nino weather pattern in the second half of the year, bringing a potential drought to Asia.

The last El Nino in 2009 cut India’s rice output by 10 million tonnes or 10%.
“The next three to four months are really crucial for the global rice market,” said Darren Cooper, senior economist at the International Grains Council (IGC) in London.

“If there is a production shortfall in India due to an El Nino event they will look to preserve stocks as much as they can.

“There will be some cushion as Thai stocks are still very high but obviously not as much as a year ago.”

Global rice prices have fallen for the past two years as Thai stocks grew under a controversial subsidy scheme launched in 2011 that paid above-market prices to farmers, making exports unviable while rival suppliers boosted shipments.

The rice subsidy has cost Thailand – traditionally the world’s largest exporter – billions of dollars in losses, while the country’s anti-graft agency has found former prime minister Yingluck Shinwatra guilty of negligence over the scheme.

Since late last year, Bangkok has been offering the lowest price in the world in an effort to unwind its stocks and stave off the political turmoil that has since engulfed the country and led to the declaration of martial law.

Martial law will not disrupt rice exports, Surasak Riangkrul, the head of the Commerce Ministry’s Department of Foreign Trade, said today.

“We will continue to sell, including negotiations to sell up to 800,000 tonnes to Malaysia.”

Thailand’s rice exports jumped 40% to 2.2 million tonnes in the first quarter of 2014 from a year earlier, driven by rising sales to China, Malaysia, Nigeria, Cameroon and South Africa, according to IGC data.

“They are giving tough competition to India in the African market and sales to China are also climbing,” said a Singapore-based senior executive with an international trading company.

The country has been selling around 400,000 tonnes a month from its stocks, although analysts say some rice is being picked up by private traders and could hit the market if prices rise.

The stocks drawdown comes as the UN World Meteorological Organization notes that most weather forecasting models indicate that an El Nino may develop around the middle of this year.

A strong El Nino could result in severe drought across large parts of Asia’s food belt, stretching from Australia to Southeast Asia and India, although it is not yet clear how intense the phenomenon will be.

“Indian rice prices will start rising if we see El Nino impacting the monsoon rains,” said a second rice trader in Singapore.

“Even now Indian prices are holding at the current level despite losing market share to Thailand.”

Rice prices in India have held above Thai prices even though the country had 20.4 million tonnes of rice in storage as of May 1, almost double the government’s target of 12.2 million tonnes.

“If a bad monsoon forces India to curb exports again, prices will go up,” said a Bangkok-based trader.

“But prices will not rise as high as we saw in 2008 as Thailand and Vietnam still have plenty of rice.”

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