LAPU LAPU CITY, CEBU, Philippines ? There is a "perfect storm" brewing and it will severely affect rice trade, possibly triggering a replay of the 2008 rice price crisis when rates soared to record levels, Agriculture Secretary Arthur Yap said during the World Rice Conference in Cebu province.
?We are not very far off from possibly another rerun of 2008,? Yap warned producers, traders, government officials and other stakeholders in the rice market who attended the conference.
?When prices are crashing, producers can deposit their stocks in the food reserve and thereby halt any further decreases in prices,? he explained. ?For consumers like us, we can always turn to the stockpile and buy rice at a certain price.?
Already, clouds are forming on the horizon, Yap said, referring to factors that greatly influence trade.
Oil prices, which affect the cost of farm inputs like fertilizer, are up 26 percent year to date to $79.22 a barrel on the New York Mercantile Exchange.
Citing these factors, Yap called for the creation of an international rice reserve and increased funding for research on rice varieties that would cope with the effects of climate change.
Movement in the prices of rice will also depend on the timing of imports, said Bob Papanos, director of Seacor Commodity Trading LLC.
Papanos, a trader based in the United States, predicted in 2007 that rice would hit $1,000 a ton.
His prediction was met with skepticism until the benchmark 100 percent B grade white rice peaked at a record $1,080 a ton in April 2008.
Most traders said on the sidelines of the conference that the benchmark white rice would not likely surge to the $1,000 a ton going into 2010 unless wide speculation of millions of tons of Indian imports proved to be true.
Abrupt weather changes had caused rice production in key exporter India to fall sharply while the world?s biggest buyer, the Philippines, started to secure its 2010 grain needs early.
But traders said it would be more likely for the benchmark 100 percent B grade white rice, currently priced at around $500 a ton, to go up to $600 to $800 a ton despite production shortfalls in India, due to drought, and the Philippines, due to storms.
Thailand Rice Exporters Association president Chookiat Ophaswongse said Thailand could serve current demands with 6 million tons available for export.
There?s also talk, he said, that the Philippines might need to import as mush as 3 million tons of rice?more than the record 2.3 million tons in 2008?as the looming 2010 elections fuel moves to secure the politically important grain.
Jeremy Zwinger, president and CEO of conference organizer The Rice Trader, said that the dollar also plays a major role in rice price trends.
He said in his presentation that studies of recent years showed that rice prices move in inverse proportion to the strength of the dollar.
Yield potential and global market integration must also improve, according to speakers on opening day of the conference.
Pham Van Du, deputy director general of South Vietnam?s Department of Crop Production, said technologies must also be transferred to farmers, otherwise, the present level of yield increases would become difficult to sustain in the next few years.
Samarendu Mohanty, senior economist at the International Rice Research Institute (Irri), said it could take five to 10 years to come up with a variety that has multiple levels of resistance to extreme weather changes.
This is why, this early, increased funding for rice research is crucial, he added.
Irri, in cooperation with the Philippine government, is working on rice varieties that can help secure productivity under extreme conditions such as the El Niño phenomenon.
The United Nations Food and Agriculture Organization said this month that rice stocks among the world?s top exporters would likely fall to less than 20 million tons in 2010 from more than 30 million tons this year as output suffers from weather changes.
With a report from Reuters
