Global production may decline after drought in India slashed monsoon output and storms in the Philippines destroyed at least 1 million tons of the crop. Rice, wheat and palm oil hit records last year, sparking concern among policy makers that there may be a food crisis as protests about high prices broke out across the globe.

“Strong demand in the global market would drive Thai exports to a record next year,” said Rewat Yenchai, an analyst at AGROW Enterprise Ltd. in Bangkok. “Thailand would benefit from a decline in global production.”

Prices may also return to record levels next year if the Thai government maintains its stockpile level, said Sarunyu.

“We may see rice climb above $1,000 a ton,” Sarunyu said. “There is a strong possibility we’ll see a rice crisis next year as India faces drought and Indonesia may feel the pinch of El Nino weather.”

Thai 100 percent grade-B white rice, the benchmark regional export price updated weekly by the Thai Rice Exporters Association, was set at $541 a ton last week. The price surged to a record $1,038 in May 2008.

‘Friendly prices’

Still, if the Thai government sells inventories under “government-to-government contracts at friendly prices, we could see the price in the $600-$700 range,” Sarunyu said.

Thai prices are “unlikely to hit a record next year because of limited purchasing power and the high level of stockpiles held by the Thai government,” Rewat said.

Thailand’s stockpiles at the end of the 2008-2009 marketing year on Sept. 30 were 3.12 million tons, according to U.S. Department of Agriculture figures released Oct. 9. Inventories will rise to 3.52 million tons next year, the USDA estimated.

Thai rice exports will approach a record 10 million tons in 2010 on higher African demand and a lack of shipments from India, Chookiat Ophaswongse, the Thai Rice Exporters Association’s president, said Oct. 2. Production may climb to 35 million tons, from an earlier estimate of 32 million tons, Chookiat said in a separate interview Nov. 5.

Expanded stockpiles

The country’s exports this year may total 8.3 million tons, lower than the association’s target of 9 million tons, as Thai prices are less competitive than rivals and buyers built up stockpiles after prices jumped last year, Sarunyu said.

Asia Golden, which was set up in 1999 by a group of traders and millers, may export up to 1.6 million metric tons of rice next year, up about 23 percent from a planned 1.3 million tons this year, he added.

The Philippines held its first tender for next-year supplies last week, a month earlier than usual, and is buying at least 850,000 tons of rice in two tenders this year. The country imported a record 2.4 million tons in 2008.

India may buy as much as 3 million tons next year and become a net importer for the first time in 21 years, Samarendu Mohanty, a senior economist at the International Rice Research Institute, said Oct. 28.

El Nino

Indonesia, the world’s third-largest producer, may shelve plans to export 2 million tons of milled rice next year if dry weather causes production to miss forecasts, state food company Bulog said Oct. 6.

Sea surface temperatures were at least 1 degree Celsius above average across much of the central and east-central equatorial Pacific in the four weeks to Oct. 31, according to a Nov. 2 report by the U.S. Climate Prediction Center. The center considers El Nino conditions to occur when monthly sea surface temperatures are at least 0.5 degree Celsius above average.

“The dryness should be coming in anytime now,” Dorab Mistry, director of Godrej International Ltd., said Monday.

Africa will remain a key export market for Thai rice next year and the country faces fierce competition as Brazil, Pakistan and Vietnam plan to increase shipments of so-called parboiled rice to Africa, Sarunyu said.

Thai shipments of parboiled rice to Africa may rise to about 4.5 million to 5 million tons this year, beating a previous forecast of 3.5 million tons, and may increase to 5.5 million tons next year, Chookiat said on Oct. 2.

Source: Bloomberg