Rice Jumps to Record, Corn Near High as Demand Outpaces Supply
By Glenys Sim
April 3 (Bloomberg) -- Rice climbed to a record and corn traded near its highest ever on speculation the 3 percent annual increase in global demand for cereals will outstrip supply as governments curb exports to prevent protests.
Rice, the staple food for about 3 billion people, rose 2.4 percent in Chicago trading today after doubling in the past year. Soybeans advanced for the third day and wheat gained. Crop supply has been reduced by drought in countries including Canada and Australia and a U.S. freeze followed by excessive rain last year.
``A lot of what we're seeing at the moment is not related to production, but the fact that a number of countries are implementing trade restrictions,' said Darren Cooper, a senior economist at the International Grains Council in London.
China, India and Vietnam have cut rice exports, and Indonesia has reduced import tariffs to protect food supplies and cool inflation. Rice in Chicago climbed 42 percent in the first quarter, more than all of last year's 33 percent gain. Record grain prices contributed to strikes in Argentina, riots in Ivory Coast and a crackdown on illicit exports in Pakistan.
Rough rice for May delivery advanced to $20.26 per 100 pounds on the Chicago Board of Trade today after the United Nations' Food and Agriculture Organization said global exports will drop 3.5 percent this year as nations curb sales. It was at $20.225 as of 11:38 a.m. London time.
The World Bank estimates ``that 33 countries around the world face potential social unrest because of the acute hike in food and energy prices,' Robert Zoellick, the bank's president, said on the organization's Web site. For these countries ``there is no margin for survival,' he said.
Commodity Prices
Commodity prices are posting their seventh year of gains. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials more than tripled in the past six years as global demand led by China outpaced supplies of metals and crops. The Standard & Poor's 500 Index of stocks gained about 20 percent.
``The international rice market is currently facing a particularly difficult situation with demand outstripping supply and substantial price increases,' said Concepcion Calpe, a senior economist at the Rome-based FAO, an agency that seeks to achieve global food security.
Pakistan, the world's fifth-biggest rice exporter, may ship 15 percent less of the grain this year after a power shortage affected milling of paddy, Mohammad Azhar Akhtar, chairman of the Rice Exporters Association of Pakistan, said by phone.
Corn for May delivery gained as much as 0.5 percent to $5.9875 a bushel. The commodity rose to a record $5.9925 a bushel yesterday on concern that rains in the U.S., the world's largest producer and exporter of the crop, will delay planting.
`Strong Fundamentals'
``We're looking at very strong fundamentals for corn,' Kazuhiko Saito, a strategist at Interes Capital Management, said in a telephone interview from Tokyo today. ``The possibility of delayed planting in the U.S. is adding to the bullishness.'
Wheat for July delivery climbed as much as 1.6 percent to $9.6575 a bushel and was at $9.62 as of 11:41 a.m. in London. In Paris, milling wheat futures gained for a third day, rising 2.50 euros, or 1.1 percent, to 241.5 euros ($375.41) a metric ton as of 12:42 p.m. in Paris.
Indonesia, the world's third-largest rice producer, may join China, India, Vietnam and Egypt in curbing exports to secure domestic supplies, Agriculture Minister Anton Apriyantono said yesterday in a text message to Bloomberg News.
The world's poor ``are living very close to the edge as it is,' said Robert Zeigler, director-general of the International Rice Research Institute in the Philippines. ``If they are pushed further, they are typically the first who will spark unrest.'
Consumer Prices
Consumer prices in China rose 8.7 percent in February, an 11-year high, and reached a 13-month peak in India. Chinese food prices, based on a government index, jumped 28 percent in February, the most since July.
The United Nations warned in February that 36 countries, including China, face food emergencies this year, as stockpiles of grains such as rice drop to a 26-year low.
The Vietnam Food Association has asked its members to stop signing new rice-export contracts between April and June, following Prime Minister Nguyen Tan Dung's directive to cut delivery of the grain overseas.
Vietnam, one of the world's three biggest rice exporters, will reduce shipments this year to 4 million tons to ensure supplies domestically and curb inflation that's at its highest in more than a decade. The government also said it's considering a tax for rice exports.
Malaysia plans to step up efforts to import rice from other Southeast Asian nations to build reserves. The Philippines is buying the grain from an emergency regional stockpile and taking additional supplies from the U.S.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
Last Updated: April 3, 2008 07:31 EDT
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