Global rice stocks reach 12-year high as food costs drop

SINGAPORE/ BANGKOK: Rice stockpiles are expanding to the highest level in 12 years as production rises to a record, adding to a worldwide surge in agricultural output that is poised to diminish the $1.1 trillion global food-import bill.

Reserves will gain for a seventh year, rising 2.7% to 108.6 million metric tonne in 2013-2014, the US Department of Agriculture estimates. Output will climb 1.9% to 479.2 million tonne, exceeding demand by 2.8 million tonne.

Prices for 5% broken Thai white rice, an Asian benchmark, will drop 13% to $455 a tonne by December, according to the median of eight trader and analyst estimates compiled by Bloomberg.

Combined global output of rice, corn, soybeans and wheat will advance to a record as fields in the US and Europe recover from droughts last year, according to the USDA. Wheat, corn and soybeans are already in bear markets, contributing to two consecutive months of declining world food costs tracked by the United Nations. Inventories of rice, the staple for half the world, are now equal to almost three years of annual trade. “The stocks are so big, I don’t think anyone can talk about a bottom in prices,” said Geneva-based Mamadou Ciss, the president of Alliance Commodities, who has traded rice for almost three decades.

“There is oversupply for sure in the world. The crops are pretty good everywhere.”

The Thai grade fell 10% to $524 a ton this year as the Standard & Poor’s GSCI Agriculture Spot Index of eight commodities retreated 15%. The MSCI All-Country World Index of equities advanced 6% and a Bank of America Corp. index shows Treasuries lost 3.5%.

Expanding rice production and stockpiles mean less demand for imports, which the UN’s Food & Agriculture Organisation in Rome estimates will drop to 37.6 million tonne, contracting for the first time in four years. Global inventories expanded 44% since 2006-2007, USDA data show. Government subsidies are encouraging more production even as prices decline and inventories expand.

Thailand, once the biggest exporter, spent 588.7 billion baht ($18.9 billion) stockpiling 27 million tonne of milled rice since October 2011.