Rice expert says plummeting rice stocks may lead to price crisis
The global rice market may see a repeat of the 2007-2008 rice price crisis due to a large decline in the production of the world’s five major exporters and a possible panicky reaction from importers, an expert at the International Rice Research Institute (IRRI) has said.
Dr. Samarendu Mohanty, head of the Social Science Division and program leader for targeting and policy at IRRI, said in a paper published in Rice Today (January-March 2016 issue) that rice stocks of India, Thailand, Vietnam, Pakistan and the United States continue to slide.
Mohanty, quoting USDA data, said rice stocks are expected to drop by 40 percent from 2015 levels late this year.
He said the biggest drop of 70 percent compared to the peak production in 2013 will come from India and Thailand. He said some predict that India may even become a net importer of rice and corn this year.
The El Nino, which is forecast to persist until the third quarter, is also projected to affect global grains production.
Mohanty said an expected drop in wheat harvest in April will force both wheat and rice prices to go up, creating anxiety among policy makers.
Adding to the problem, he said, is that Indonesia and the Philippines, two major rice importers which are suffering from drought, are aggressively importing due to low inventory and supply uncertainty.
“It will be an interesting few months for the global market, which faces a tight supply situation for the first time since 2007-2008,” he said.
He explained that if the wet season is normal for major rice-growing countries, then rice supply and prices will be stable until 2017.
However, if they are severely affected by calamities, “the mettle of the market will definitely be tested.”
He said the reaction of major rice exporting and importing countries to limited Thai rice stocks would determine the state of global prices.
“If they panic similar to 2007-2008, and resort to excessive buying and export restrictions, then another price spike is in the offing. However, if they keep their cool and remain rational regarding their needs, the market price may still go up but only to a level consistent with market fundamentals,” he added.