RIYADH, 29 March 2008 — Rice prices are likely to increase in the Kingdom with major rice exporters Vietnam and India yesterday confirming that they will curb overseas sales in an effort to combat food inflation.
The move to curb exports by these countries threaten to heighten the world’s anxiety over staple food supplies.
The Kingdom has already set in motion plans to counter the price rise. The Council of Ministers adopted a 17-point program on Jan. 28 in order to keep prices under control. It also increased the subsidies for rice, barley and baby milk, but people have not yet felt the effect of these measures.
Shoura member Abulrahman Al-Zamil, who is also a businessman, said that Saudi subsidy on imported rice would help consumers in the Kingdom, but only temporarily. In the long run, people in the Kingdom should be prepared for an increase in prices.
“The quantity of Indian rice exported to Saudi Arabia, the Gulf, or anywhere else in the world is limited by government rules. Since demand is large and the supply is the same, the prices will go up here because there will be competition between importers,” he told Arab News, adding that currently the Saudi government is paying a margin of the profit to importers.
The Shoura member said that it was inevitable that global prices of food such as rice, corn and wheat would go up by 30 percent in the near future due to many factors, according to the World Bank. The solution, he said, was for the Saudi population to change their eating habits when it comes to rice.
He noted that Saudis should be more “rational,” adding they should also conserve by not throwing away leftover rice, which we see often in Saudi households today.
“It is for people to conserve. I am not asking people to cook less, but I am saying they should change their eating habits,” he said.Yasin Alireza, a leading Saudi businessman, said: “We don’t know what type of rice is banned for export by India and Vietnam. India is a major exporter of rice, including raw and parboiled. India has been exporting to the Kingdom basmati and a variety called “parmal.” Less imports, especially from India, will mean higher prices.
The Kingdom has also been getting rice from Pakistan and Thailand. Pakistani basmati is preferred in the Eastern Province. In the Western Province, there is a preference for parboiled rice. The United States and Egypt are among other countries exporting rice to the Kingdom.
In Riyadh, India’s Ambassador M.O.H. Farook said the Indian Embassy informed New Delhi on Thursday about the Saudi government’s decision to subsidize the price of rice and other essential commodities.
“As a result there is a big rush on the part of rice suppliers to take out permits to benefit from the current situation,” the envoy said, adding that he is awaiting his government’s next move.
Earlier yesterday, Hanoi confirmed it would cut rice exports by 22 percent this year.
India raised the minimum sale price for rice exports by more than 50 percent, effectively ending overseas sales of all but the highest quality grades.
These are the latest measures by governments from Manila to Cairo to ensure sufficient supplies for their expanding populations at a time when global stockpiles have halved and prices have doubled to multiyear highs.
While consumer nations like the Philippines fret over food security, big producers are aiming to tame inflation by keeping more supplies at home to drive down domestic prices.
In Vietnam, consumer prices rose by nearly 20 percent in March, the highest in more than 12 years, while India’s wholesale price inflation has surged to a near 14-month high, posing a major policy challenge at a time when economic growth is slowing.
Vietnam, the world’s second-biggest exporter, will limit rice shipments to 3.5 million tons, down from 4.5 million last year, in order to stabilize prices, a government statement quoted Prime Minister Nguyen Tan Dung as saying after Hanoi imposed a limit for the first 10-month shipment last week.
“Vietnam will save 1 million tons of rice for northern provinces and will see prices easing following this cut,” said a rice trader at a foreign firm in Ho Chi Minh City, Vietnam’s largest grain trading market.
India, which could overtake Vietnam this year, has raised the minimum export price for non-basmati rice to $1,000 per ton from $650 to protect domestic supplies. It also scrapped tax incentives for exporters of non-basmati rice to try and tame price pressures in Asia’s third-largest economy. “The government’s move is aimed at a complete halt of non-basmati rice exports,” said Prem Garg, managing director of Lal Mahal Group, a leading rice exporter.
Trade officials believe India will be able to export 5.5 million tons of rice in the year to March 31, up from 3.8 million tons in the previous year, but say the new restrictions could cut sales in coming months.
“The government is concerned about domestic supplies,” said Vijay Sethia, president of the All India Rice Exporters’ Association. “There is no shortage of rice in India, but any scarcity in global markets will lead to higher exports.” Nearly half the planet’s 6.6 billion people depend on rice to survive but rising populations and economic growth mean that the world is already eating more of the grain than is harvested.
World rice inventories now stand at about 72 million tons, their lowest since the mid-1970s and enough to cover about 17 percent of global annual consumption, data from the US Department of Agriculture show. Just eight years ago stockpiles were equal to 35 percent of demand.
Vietnam exported 859,000 tons of rice in the first three months of this year, up 5.3 percent from a year earlier, government figures show.
The price for cargoes of Thai medium-grade 15 percent broken rice, a benchmark for a market that does not have an active global futures contract, more than doubled to $735 a ton free-on board Bangkok on Thursday, from $360 at the end of 2007. Vietnam rice prices are up 26 percent so far this year.
Egypt said earlier this week it would ban rice exports from April 1 to October to hold down local prices. The Philippines aims to import up to 2.2 million tons this year in what could be the biggest overseas purchase in a decade.
Thailand’s rice exporters, who have been unable to buy the grain on the local market because of widespread speculation and hoarding, have started defaulting on orders, the head of the Thai Rice Exporters Association said yesterday.
“There will be a lot of defaults coming up, because we cannot find any rice in the market,” said Chookiat Ophaswongse, president of the association. “What’s happening now is a lot of traders have started to negotiate with buyers abroad on how to compensate them because we cannot buy any rice.”
Thailand’s rice trade has been hard hit this year by unprecedented price volatility in the market, sparked by India’s decision to halt rice exports.
India traditionally exports about 4 million tons of rice a year. “And this year they just stopped, so that 4 million tons out of a market of say 29 million tons was removed,” said Chookiat.
— With input from agencies
