Rice production in Thailand and Vietnam, the two largest exporters, may be hurt by drier-than-normal weather that's parched farms and cut water levels in the Mekong River, according to the Food and Agriculture Organization.
The Thai harvest that begins this month, which accounts for about 25 percent of annual output, may drop to 7 million metric tons from 8.4 million last year, said Concepcion Calpe, a senior economist at the United Nations' agency. Output from Vietnam's end-of-year harvest "may be affected," Calpe said.
Drought linked to the El Nino weather pattern has affected a swathe of Asia from southern China into mainland Southeast Asia, prompting a warning from the Thai prime minister that rice prices may gain as output declines. Lower production of Asia's most important staple may cut global stockpiles.
"For the time being, Thailand is the only country that shows a decline in rice production," Calpe said Tuesday in a phone interview. Still, "the decline will not have a dramatic impact on international trade as Thailand has lots of stocks."
Rough-rice futures in Chicago, which have slumped about 12 percent this year, gained as much as 1.2 percent Wednesday to $13.13 per 100 pounds, the highest price in almost a month. Thai weekly export prices, a benchmark for Asia, have fallen 11 percent this year to $527 a ton for 100 percent grade B rice.
"I don't really see prices dropping any further," said Samarendu Mohanty, a senior economist at the International Rice Research Institute in the Philippines. The water shortage may limit the expansion in rice output and, as demand rises, that may push stockpiles lower and help support prices, Mohanty said.
The dry weather may also hurt coffee output in Vietnam, officials and growers said last month, including Huynh Quoc Thich, the head of the cultivation office in Dak Lak's agricultural department. Palm oil production in Malaysia, the second-largest grower, may drop between 2 and 3 percent on the El Nino, the Malaysian Estate Owners Association has said.
Water levels in the Mekong, which flows from China through Myanmar, Laos, Thailand, Cambodia and Vietnam, are at the lowest level in 90 years, the Mekong River Commission said March 5. Thai rice production may drop and the price may jump because of dry weather, Thai Prime Minister Abhisit Vejjajiva said March 2.
Global rice stockpiles may total 90.925 million tons this year, the U.S. Department of Agriculture said on March 10, paring its estimate from 92.497 million a month earlier. That compares with a global inventory of 91.219 million tons last year, and a record 146.714 million tons in the 2000-2001 season.
The level of global stockpiles is "still much lower than it used to be," Mohanty from the rice institute said by phone Tuesday. "If we have some problem with water supply, then that will affect the yield," he said.
Rice stockpiles maintained by the Thai government are 5 million to 6 million tons, according to the Commerce Ministry. The authorities have said they plan to sell some to exporters and other countries, without giving a timeframe. The nation accounts for about a third of the global rice trade.
Officials have linked the drought to the El Nino weather phenomenon, characterized by warmer sea-surface temperatures in the eastern Pacific that can cut rains in Asia. Virapan Tipsuna, a farmer in Thailand's northeastern province of Nongkhai, said last month it was "the driest period" he'd ever seen.
The drought may also affect the next season's main rice crop in Thailand "unless there is rainfall by May or June," said Calpe at the FAO. "What is more worrisome is the water in Mekong River affects more than one country."