Tuesday, November 2, 2010

The rice market

At the moment the supply of rice is a problem. But just how much is caused by poor crops and how much is caused by government interference with the supply?

We know that the latest harvest in Pakistan was 40% down on previous harvests. This caused a real problem as Pakistan not only consumes rice domestically but earns valuable export dollars. Add to this the poor wheat harvest and a sugar shortage and that weighs heavily on their GDP as well.

The wheat harvest was so bad in Russia that they stopped exporting. This had the effect of causing shortages in importing countries and they then turned to rice as a substitute. This also effected rice stocks. But a check of stocks in the local market here in Thailand show that stocks are plentiful even as the price climbs,

But we shouldn’t get too excited because right now huge areas of land used primarily for rice growing are currently underwater from unprecedented floods in the north and north-east of Thailand. It may well be that those reserves, which were seen as a government manipulation of the market, will come in handy when domestic production falls. In a country where rice is a staple any shortage of rice would be a total disaster.

Written by Haydn Leseberg, Trade Manager, Sutlet Group

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