Drought in India may slash rice output in the world’s second-largest grower by about 18 percent this year, cutting global supplies available for importers, a United Nations official said.

A reduction in exports from India, which already has a ban on shipments of non-basmati rice, is unlikely to spark another cooking crisis as record global output last year helped countries boost inventories that they can use to fill a production gap, Calpe said.

Export curbs by major producers including India, Vietnam and China last year raised fears of a food crisis. Global rice prices soared to a record amid declining inventories, prompting governments around the world to secure domestic supplies as importers scrambled for shipments.

“At the moment, there is no evidence of supply shortages in the market,” Calpe said, adding that last year’s record prices were “not really triggered by shortages, it was an overreaction by governments and the market.”

Rough rice futures have fallen by nearly half since surging to a record $25.07 per 100 pounds in April 2008 on the Chicago Board of Trade after farmers around the world rushed to boost production to a record last year, replenishing stockpiles and averting a global shortage.

Rough rice for November delivery gained for a fourth day on Thursday, adding 0.5 percent to $13.285 per 100 pounds at 9:13 a.m. in Singapore.

Dwindling inventories

Milled rice output in India will drop by a “conservative estimate” of 18 million metric tons to 81 million tons in the marketing year that began Oct. 1, Calpe said. That would push production below the country’s estimated demand of 89 million tons next year, she added.

India’s absence in the export market may curb supplies available for importers at a time when global stockpiles are forecast by the FAO to drop 3 percent to 117.4 million tons by the end of the 2009-2010 season.

The shortfall between production and demand may cause a drop of nearly half in India’s inventory to 11 million tons at the end of the 2009-2010 marketing year, from 21 million tons a year earlier, according to FAO data. India is unlikely to become a rice importer this year, according to Calpe.

Global stockpiles may drop further after two storms in the Philippines, the world’s biggest importer, wiped out at least 450,000 tons, or 7 percent, of the fourth-quarter rice crop, and destroyed inventories in cities including Marikina and Pasig, potentially forcing the country to boost purchases next year.

El Nino threat

The impact of El Nino, which can delay rains in Asia and cause flooding in South America, may push global production lower next year, forcing affected countries to draw down inventories, Calpe said.

“Indonesia is especially at risk and Australia of course,” Calpe said, referring to the impact of El Nino. The weather phenomenon may also lower yields in South America “because if it’s cloudy, they won’t get the proper sun and that’s very important for yields.”

Indonesian state food company Bulog said Oct. 6 the country may have to shelve plans to export 2 million tons of rice next year, the largest in at least 50 years, if dry weather caused by El Nino pushes production to miss a state forecast of 40 million tons this year.

“Next year, if there’s a bad year, then things are going to be more serious because then we’d have to work from much lower stocks.”

Source: Bloomberg