India, the world’s second-largest rice grower, may become a net importer for the first time in 21 years in 2010, potentially sparking the kind of “panic” that sent prices to records in 2008, a rice expert said.

Food price protests swept the globe from Bangladesh to Haiti last year after fears of supply shortages prompted producers including India and Vietnam to cut rice exports. Rice futures surged to a record $25.07 per 100 pounds in April 2008 as shipments slowed and importers including the Philippines, the biggest buyer, increased purchases to secure supplies.

“India can start it again,” Mohanty said Wednesday in an interview in Cebu, central Philippines. “If rice prices rise, there will be civil unrest in many countries.”

Rice for January delivery jumped 3 percent to close at $14.18 per 100 pounds on the Chicago Board of Trade Wednesday and traded at US$14.195 as of 8:53 a.m. Singapore time.

Futures and spot prices have yet to reflect the global supply and demand situation because of a lack of transparency in some of the government data that traders rely on, Dwight Roberts, president of the US Rice Producers Association, said on Oct. 27.

India’s wet season harvest, which accounts for 80 percent of its total output in the world’s second-most populous nation, may slump as much as 24 percent to 65 million tons, from 85 million tons a year ago, said Mohanty, who inspected rice fields in the country in the past few weeks.

Tight situation

The weakest monsoon since 1972 is likely to hurt the harvest of non-basmati rice, the lower-priced variety eaten by majority of the population. About 20 million tons is sold annually by the government at subsidized prices to about 65 million poor families, Mohanty said.

“The situation is very tight, there’s no doubt,” Mohanty said. “It depends on how the country reacts, whether there’s a panic in India or the Philippines. Those are the problem countries right now that can tilt the market one way or the other. In the rice market, panic is very easy to come.”

India has no plans to import rice because its reserves are adequate, Nanda Kumar, the country’s farm secretary, said in New Delhi Oct 27.

“They can survive without imports, if they decide to do so, but there are risks involved,” Mohanty said. “If they have a drought next year, they have to import.”

Stockpile risk

India’s return to the import market would push Thai rice export prices, the regional benchmark, at least 25 percent higher from current levels, and fuel a further rise to $800 a ton, Rakesh Singh, head rice trader at Emmsons International Ltd., which supplies about 500,000 tons a year in India, said in an interview Wednesday.

The Indian government “can’t afford to have a very low stockpile of rice next year in case another drought or flooding hurts crops,” Singh said. “We may hear about a tender in the next few weeks.”

The Thai Rice Exporters Association kept the export price of 100 percent grade-B Thai white rice unchanged at $525 a ton Wednesday, ending four weeks of declines.

“Thailand has some stocks but not enough,” Mohanty said. “So if India is in the market they might go and see if they can get a higher price. Thailand is not in a hurry to sell at all because they know the market isn’t going to go down. The market is most likely to go up.”

Regional exchange

The Philippines may boost overseas purchases to 2 million tons in 2010, from 1.78 million tons this year, after Tropical Storm Ketsana and Typhoon Parma damaged crops, the National Food Authority said Oct. 9. The Southeast Asian nation is bringing forward rice imports for 2010 after the losses, National Food Administrator Jessup Navarro said Oct. 26.

A regional commodities exchange should be created to curb panic in the market, the Rice Research Institute’s Mohanty said, as it would allow importing countries like the Philippines to buy futures contracts, ensuring supplies will be available when they need them and putting an end to export bans.

“Countries cannot put export bans or restrictions” if futures contracts are sold because exporters will be legally bound to deliver the rice at a specific date, he said. “That will also reduce the panic of importers.”

Source: Bloomberg