May 16, 2011

Myanmar lifts ban on rice exports, prices expected to fall

Asian rice prices are likely to come under downward pressure this week as Myanmar has lifted its ban on exports and cheaper Brazilian sales of parboiled grades are also weighing on the market, trade participants said Monday.

Myanmar's move is significant because its rice is the cheapest in the world and in strong demand among the low income African countries. Exports from the country have been banned for more than two months.

It has already sold around 100,000 metric tons of 25%-broken rice in the past few days for shipments in May and June around $390-$400/ton.

Global trading companies purchasing rice from Myanmar's exporters are in turn selling to buyers in Africa at prices of up to $415/ton, free on board, they said.

The world's largest rice exporters, Thailand and Vietnam, have also harvested bumper crops. Thailand has just harvested its secondary rice crop, which on a milled basis is around 300,000 tons larger than last year's.

Most traders expect a $5-$12 decline in prices of various rice grades this week.

Thai rice prices haven't moved much recently, but if Myanmar continues to export the grain, it could start to put downward pressure on prices, said Chookiat Ophaswongse, managing director of major Thai exporter Huay Chuan Rice Co.

Vietnam and Thai 25% brokens are now offered around $440/ton and $455-$460/ton, FOB. Another major exporter, Pakistan, is offering the grade around $450/ton, FOB.

Thai and Vietnamese 5% brokens are offered around $480/ton, and Pakistan's is costlier at $500/ton, FOB. Usually, Pakistani and Vietnamese rice sell at a discount to Thailand's.

"Myanmar's lifting of the ban on rice exports will definitely drag down prices," said Abdul Aziz Ghaffar, chief executive of RiceTex, a Karachi-based trading company.

He said Pakistan's rice prices are unusually high because many exporters who had sold rice in forward deals are now covering their requirements for physical shipments. "A downward correction is now due."

Vietnam's rice export prices are also expected to decline, taking leads from the domestic market where ample supply has dragged down rates by VND400/kilogram in the last two weeks, an analyst in Singapore said.

Another Singapore-based trader said the fact that gap between Thai and Vietnamese rice prices has narrowed reflects a bearish outlook.

Vietnam will have to lower its rates, as it has to stay competitive with its neighbor, he said.

Thailand has more of a chance to make sales at current rates than Vietnam, said Chookiat.

He said in parboiled grades, where Vietnam isn't a major exporter, Thailand is facing competition from Brazil.

Brazil is exporting parboiled rice to African countries around $460-$470/ton, FOB, which is $30-$40 cheaper than Thailand's.

Parboiled grades have accounted for 30% of Thailand's rice exports in recent months.

Source: WSJ