- Rising inventories. According to the Food and Agriculture Organization (FAO), world inventories of rice may advance 7 million tons to 139 million tons this year, the highest level since 2002. Based on a preliminary forecast, closing global inventories may surge to 150 million tons next year.
- Falling prices. Thai rice production is seen to be bountiful because the weather is very suitable for planting rice. With increasing supplies and heightening competition from Vietnam, Thai rice prices are projected to decline. This may help drive record-high rice prices down and help ease global inflationary pressures and cut costs for buyers.
- Higher production for other crops. While Thai farmers may harvest more rice, their U.S. counterparts may cut back, favoring other crops. Growers in the U.S. planned to cut rice plantings 17 percent to 3.018 million acres (1.221 million hectares) this year, because of attractive returns for corn, cotton and soybeans.
- Benefit to manufacturers and consumers. Lower rice prices may decrease the buying costs of manufacturers especially cereal makers such as Kellogg and General Mills Inc. (GIS) as well as buyers like Uncle Ben’s.
- Benefit to the poor. Increased rice supplies from Thailand, the biggest shipper, may help boost global rice reserves and cap prices. This will mitigate high food costs that have pushed 44 million people into poverty February this year.
Source:
Suwannakij, Supunnabul, “Rice May Fall on ‘Abundant’ Thai Supply, Aiding World’s Poor as Corn Gains,” Bloomberg, 4 May 2011, from http://www.bloomberg.com/news/2011-05-04/-abundant-thai-rice-supply-to-keep-cap-on-global-prices-un-agency-says.html.
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