Will rice market go up in flames again?

(First of two parts)

MANILA, Philippines - The National Food Authority (NFA), the rice buying authority for the Philippines, has just held its first of three December tenders, with announced purchasing efforts for the month to total 1.8 million metric tons (mmt).

Because of the string of tenders proclaimed widely to the press, reports that NFA buying might be 3.0 mmt before it is finished, and reports that India may buy 2-3 mmt, today’s prices are almost $150/ton greater than those paid by Manila less than one month ago.

Assuming that NFA uses its entire budget allocated for the tender, it will pay an average price of over $624 CNF for 522,000 tons of an intended purchase of 600,000 tons.

This compares to an average purchase price of $475 paid on Nov. 3.

Allowing $40/ton for freight and financing – and making no provisions for commissions — this would equate to $584 FOB.

As of Oct. 9, the week prior to NFA’s first tender announcement, the price of low-grade Vietnamese rice, the quality usually purchased by NFA, was only $340.

Will the world rice market in 2010 go up in flames again, repeating last year’s crisis when world prices more than trebled in four months? An earlier analysis showed that world prices soared to over $1,000 per ton because of three intersecting events: 1) India’s ban of non-Basmati exports as it sought to minimize wheat imports; 2) Vietnam’s export restrictions as Vinafood 2, a state-owned company, attempted to maximize sales to the Philippines without having to compete for supplies; and 3) reckless buying by the Philippines. (To be continued)