World rice markets are likely to remain tight next year despite an expected record harvest after key producers clamped down on exports, the International Rice Research Institute said.

Demand for rice will increase because the economic slowdown will force poor people to eat more in place of meat, said Robert Zeigler, director-general of the International Rice Research Institute.

Rice, the staple cooking for three billion people, has climbed 29 percent in the past year to US$15.38 per 100 pounds. The price reached a record $25.07 on April 24 as Vietnam, India and Egypt curbed exports to protect domestic stockpiles and cool prices. The gains contributed to food riots around the globe, from Haiti to Egypt.

“When the global economy is in recession, buyers get more frugal,” said Kiattisak Kanlayasirivat, Managing Director of I.C.C. Trading (Thailand) Ltd., which sells rice to Africa. “They will likely turn to rice as it’s cheaper than meat.”

The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries, analysts say.

“The price has been rising steadily” since 2000 because “we’ve failed to invest,” Zeigler said. “The financial crisis suggests we may not turn those investments around and that leads me to the inescapable conclusion that upward pressure” on prices will continue, he said.

More hunger

The number of hungry around the world is at risk of increasing as the lending slump cuts investment in agriculture and crops, according to Abdolreza Abbassian, secretary of the Intergovernmental Group on Grains at the United Nations Food and Agriculture Organization in Rome.

“If fertilizer remains expensive and importers are unable to get credit to buy it, that has an immediate impact on production,” Zeigler said. “If credit is not available for infrastructure, such as maintaining irrigation, the long-term impact is very negative.”

Thailand Wednesday cut the benchmark export price of white rice by 5.9 percent to the lowest since March 26, according to Sompetch Anuchon, an official with the Thai Rice Exporters Association.

The price of 100 percent grade B rice was set at $625 a ton, compared with $664 last week, Sompetch said. The rice fetched an average $336 a ton in October last year.

Still, supplies have been increasing in producing countries as farmers plant more in response to rising prices.

Thai sale

Thailand, the world’s biggest exporter, may sell rice from state reserves at a loss because it must empty warehouses before the next crop arrives, Commerce Minister Chaiya Sasomsup told reporters last Friday. The country began stockpiling rice earlier this year to secure supplies as prices reached records.

Vietnam, the world’s second-largest shipper of rice, has proposed slashing export duties to zero, Ha Noi Moi newspaper said on October 21, citing an unidentified official. The country imposed a tax on exports in July on concern there would be a shortage.

Indonesia may export as much as 2 million tons of rice in 2009 as production increases because of better seeds, Agriculture Minister Anton Apriyantono said in an interview on October 13. That would be the most in at least 50 years, according to US Department of Agriculture figures.

Source: Bloomberg