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Commodities eye

Rice prices poised to climb as drought deepens

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A boy catches fish in a dried-up pond near the banks of the Ganges River in Allahabad, India, on June 4. The government says the country is headed for its first drought in six years.   © Reuters

BANGKOK -- It is baking hot in the mid-afternoon just outside Laos' capital, Vientiane. Won, a local rice farmer, looks up at the cloudless sky. It should be humid and raining, but so far in June, this area close to the Mekong River, which separates Laos from Thailand, has only seen desultory showers every few days. Won has already planted rice on her 6 hectares of paddies, but just down the road other fields lay fallow, waiting for regular downpours that the rice crops need.

     "We have some irrigation water but the water levels are much lower than last year, when the rain started earlier," she told the Nikkei Asian Review. "If rain doesn't come in July, I will let the rice die." Won said that the irrigation water will only last for a few weeks.

     

     It is the same story in Fang, hundreds of kilometers away in Thailand's far north, near the border with Myanmar. Farmer Panbunta Kantapan said the situation is already desperate. "If the rain does not come soon there will be no point planting at all," he said, adding that he was considering planting a less water-intensive crop, such as corn.

El Nino is back     

Heat waves and drought have gripped nations across South and Southeast Asia as El Nino has taken hold for the first time since 2009. It has brought heavier rainfall to the Americas and a hotter and drier summer to Asia.

     That is bleak news for rice production and exports as the three nations suffering the effects of the drought -- India, Vietnam and Thailand -- are also the world's leading exporters. The grain is the world's third-biggest crop after sugar cane and corn, according to the United Nations.

     In Thailand, water shortages are so severe in 22 of the 76 provinces that the government has asked farmers to delay planting this year's main crop due to low dam levels, affecting 3.41 million of the 4.16 million hectares of rice fields under cultivation. The meteorological department said at the end of June that the volume of water in central Thailand's biggest reservoir was at its lowest in 20 years.

     Agriculture is certainly feeling the impact of hotter summers. Global rice production fell 0.5% on the year to 741.3 million tons in 2014 due to warmer weather, the United Nations Food and Agriculture Organization said in its April 2015 edition of Rice Market Monitor.

     Despite the fall in output, the price of rice has been weaker this year compared with 2014, partly due to Thailand offloading stockpiles accumulated under a now-discontinued government subsidy scheme. According to the Oryza White Rice Index, the price has fallen from $490 per ton in June 2014 to $405 per ton in June 2015.

     But that price is seen to rebound over the next few months as demand outstrips supply. Farmers who have guaranteed irrigation or who live in regions less affected by this year's weather could be benefiting from higher export prices.

     "Since the cause of the drought is possibly from the El Nino effect, the price would rise along with the demand for rice," a senior official at the Thai Rice Exporters Association told the NAR on condition of anonymity.

Drawing on stockpiles

Thailand's Commerce Minister General Chatchai Sarikulya said earlier in June that he expected rice production to fall to 25 million tons this year, down from 30 million tons last year. However, he said Thailand would be able to draw from its stockpiles and export 10 million tons, up slightly from last year's 9 million tons.

     That will make Thailand the world's No. 1 rice exporter this year, regaining the position from India, which had occupied the top spot since 2012.

     While that is great news for the country's big rice exporters, it is cold comfort for the farmers still struggling for survival in Thailand's parched paddy fields.

  

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