FAO anticipates record-breaking Asian rice crop

By RJ Whitehead

- Last updated on GMT

Related tags Agriculture

FAO anticipates record-breaking Asian rice crop
A deluge of early monsoon rains is expected to help produce a bumper Asian rice crop this season, the United Nations Food and Agriculture Organisation has predicted.

The FAO estimates that the continent will harvest 452m tonnes this year, up 1.5% from 2012 if the weather holds.

"India, together with mainland China, is forecast to lead the region's growth, but virtually all countries in the region are heading towards larger crops​,'' the organisation said in its latest Rice Market Monitor.

However, the FAO also predicted that global rice trade this year would decline by 2.5% to 37.5m tons, putting prices on a downward trend.

"The tendency for prices to fall has been particularly pronounced in Thailand, where uncertainties over the paddy pledging programme compounded the downward pressure exerted by weak external demand and a depreciating baht​,'' the report said.

Thailand has been offering farmers fixed prices for their paddy, or unhusked rice, since October 2011, as part of the current government's populist rice mortgage platform.

The scheme resulted in accumulated losses worth an estimated THB137bn in the 2011/12 season, and a huge stockpile this year of about 17m tonnes of rice in government-financed warehouses.

The fixed prices, considerably above market prices, have encouraged Thai farmers to grow more rice this year.

Prodigious monsoon

In India, the timely arrival of the southwest monsoon over the coast of Kerala on June 1 has led to the fast progression of rains, which covered the whole of India a month ahead of normal. This allowed an early advancement of the first Kharif crop plantings and, by mid-July, a reported 15.5m hectares were under paddy - 11% more than was the case in 2012. 

Concerns over the size of public grain inventories has led the authorities to limit the increase in minimum support prices for paddy to 5% this season. The FAO now anticipates Indian production will reach 159m tonnes (106m tonnes on a milled basis), which would surpass the 2012 level by 1.5 percent and bring about a new record.

In Thailand, prospects for the 2013 season are also positive. Good weather has permitted the planting of main paddy crops to proceed smoothly, with favourable rains also expected to replenish major reservoirs for the irrigated offseason crop. Assuming climatic conditions remain conducive for the remainder of the season and considering the strong public support extended to the sector, Thailand is forecast to gather 37.5m tonnes (24.8m tonnes on a milled basis), a total that is 2% more than in 2012.

Programme pressure

However, little question remains over the Thai government’s intention to extend the controversial paddy pledging scheme for a third consecutive season, although the terms of its implementation, and especially the prices to be offered to producers, have yet to be defined. 

Mounting pressure over the financial weight of the programme after the scheme was found to have accumulated losses worth of THB137bn (US$4.4bn) in the last season alone, prompted the authorities in June to abruptly cut mortgaging prices by 20% for what was left of the 2012/13 secondary-crop run of the programme​,” the report noted. 

Yet, faced with strong opposition from farmers, the government reverted its decision less than two weeks later, re-establishing prices at THB13,800-15,000 (US$444-482) per tonne. 

With the country’s competitiveness on international markets severely eroded by the high domestic prices and the government having to shoulder the costs of maintaining enormous public stocks, it would appear increasingly likely that pledging prices will be decreased​,” the FAO added.

Decisions to these effects are, however, likely to be accompanied by the institution of alternative support measures, including efforts to assist producers cut production costs and raise yields, or move into cultivation of more profitable crops.

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