DINDEX/540-Rice May Slump, Easing Global Food Inflation

Rice, which has beaten corn, wheat and soybeans in the past year, may drop as India restarts non- basmati exports after a ban was lifted, boosting global supplies as buyers including Indonesia take less than expected.

The Indian shipments will have a bearish impact and futures may average $16 per 100 pounds in Chicago in the fourth quarter, according to Abah Ofon, an analyst at Standard Chartered Plc. That compares with $16.987 so far this quarter. Prices may fall as India’s shipments cut Thailand’s market share in Africa, said Mohammad Ismet, a senior adviser to Indonesian food agency Bulog.

Cheaper rice may improve the lives of the 1.1 billion the World Bank says live on less than $1 a day, while restraining food inflation and cutting the pressure on central banks to raise interest rates. Global food prices have rallied 26 percent in the past year, bolstered by a plan by Thailand, the largest exporter, to buy rice from farmers at above-market rates.

Rice has surged 42 percent in the past 12 months, beating rallies in corn and soybeans, while wheat has dropped. The November-delivery contract was unchanged at $17.195. The price touched $18.54 on Sept. 12, the highest level since October 2008. The rate for 100 percent grade-B Thai rice was quoted at $629 per metric ton on Sept. 7.

Indian Exports

India’s government, which banned private companies from shipping non-basmati rice in April 2008 amid a global food crisis, lifted that restriction on Sept. 8. Exports from the second-largest producer may total 4 million tons for the year from April 1, Vijay Setia, president of the All India Rice Exporters Association, said on Sept. 13.

Indian shipments will account for 11 percent of the global rice trade this year, overtaking the U.S. and Pakistan to become the third-largest shipper, according to projections from the U.S. Department of Agriculture, or USDA, in a report on Sept. 12.

‘Quite Dangerous’

The end of India’s curb, coupled with Thailand’s plan, may add to volatility, exposing traders to potential losses, said Amit Gulrajani, general manager for rice trading and shipping at Olam International Ltd. (OLAM), one of the world’s three biggest rice traders. “Going long or short could be quite dangerous,” said Gulrajani, referring to bets on gains and losses.

Imports by Indonesia may be capped at 1.2 million tons this year, said Bulog’s Ismet. That’s less than a forecast of 2.2 million tons from the USDA. Imports include the 400,000 tons bought from Vietnam last week, Ismet said.

Bangladesh, South Asia’s biggest buyer, may cut its forecast for imports by half as local output climbs, according to the Bangladesh Directorate General of Food. Shipments may total 400,000 tons in the year from July 1 compared with 800,000 tons estimated two months ago, according to Badrul Hasan, director for procurement at the Bangladesh Directorate General of Food. Imports were 1.26 million tons in the year to June 30.

Global output may climb to a record 458.4 million tons in 2011-2012, buoyed by larger harvests in China, the Philippines and the U.S., according to the Sept. 12 report by the USDA. That would be a second year of record supply, outpacing demand and lifting so-called ending stockpiles to the highest level in nine years, the USDA said.