ALL EYES ON
THAILAND AS PRICES LOOK UPWARDS:
We are increasingly feeling
that prices are on their way up, not because of what is happening in the U.S.,
but also because of the possibilities now seen in Asia. This week’s hot news –
really a combination of two weeks of developments reveals the following:
Iraq buys 100
TMT of rice, 70 TMT from Chaiyaporn at prices of $608 and $612 PMT CIF
respectively, and another 30 TMT from Saif International, thought to be of
Uruguay origin at $682 PMT. The reality is that many felt that Thai prices were
exceptionally “cheap” with most of the trade offers seen at $620-30 PMT levels.
Thailand announces
tender for release of 753 TMT of Thai stocks (of a variety of grades, brokens
and fragrant rice. While the size of the release is not much compared to
stocks, this news was accompanied by news in the Thai press of a 2 MMT deal to
sell to China as well as a 1 MMT deal with Indonesia that most suggest to be
MOUs at best. This is on top of an earlier agreement with Ivory Coast for 240
TMT. The problem is that almost none of these are showing up in the market
place, with no freight market activities seen to back up some of these claims.
Thai stocks are said to be at 17 MMT or nearly 11 MMT milled and while the
government looks set to continue the scheme (and we expect more warehouses to
be built), there is still pressure from these mounting stocks. Sources we
contacted suggested that these stocks could take 3 years or more to dispose
into the market, and if the current market conditions persist, the stocks will
continue to rise and add even more pressure. While there is somewhat of a veil
of secrecy behind what exporters may offer for these stocks (which incidentally
can be used for domestic as well as export markets), higher prices in Vietnam
and India would suggest that offer prices will be higher that during the last
tender which was cancelled. We are however unsure as to how close this will
come to government expectations, which are at a much higher level.
Vietnam prices were up over recent weeks but look stable now, to slightly lower as no
Indonesian deal came, and as Philippines, shipments were also facing scrutiny
now that the customs in the Philippines was on alert after the recent press
news on smuggled rice, which seems to have half its problem solved. About half the cargo was apparently purchases
by a licensed importer, but the matter is still the subject of numerous views
to whether the rice, currently in Subic (a transshipment zone) is actually
smuggled. These higher prices are not back by much demand, though there are two
trade buyers seemingly active in procurement and loading in the last week or
so. The sales to Thailand seem to have created a vacuum in brokens, as we get
indication prices of $390-410 PMT for Viet brokens, but with the exporters
telling us that they really cannot supply it. This squeeze on broken rice is seen
to be the core for the current price rises, and notably a squeeze in the
premium between higher grades and low grades, with low grades looking firm due
to the tightness in brokens – except in Thailand, which seems to benefit from
cheaper materials coming from cross border sources.
Is old crop available from Thailand from privately
negotiated sources? The answer seems
to be a yes, but the details are fuzzy at best, and some traders we contacted
suggested that there were a number of layers in price, from the formal
indications we provide, to a variety of price options for old crop (some of it
are old crop stocks held by exporters – not all are from these “secret deals”
the press in on about). The market reality is that with higher offer prices
from Vietnam and India, and with India looking relatively tight for supplies
before the next season, there is a window of opportunity for Thai old crop, but
the lock and keys to the stocks are with the government which continues to mull
over these decisions, perhaps hoping for some form of news from India.
India stable, but with less availability and a higher
price. India looks remarkably stable,
prices are slightly firmer, shipping is relatively slow as competition between
grain exports and some monsoon led loading delays (and slow loading) seem to
have capped its ability to export more. The monsoon looks better, with rains
now seen at 16% below norm, and with plantings almost at back to normal. There
is a sense of optimism from India, perhaps from the 28.5 MMT of rice stocks and
the 76 MMT total grain stocks held, but also from news of better pulses
plantings, and some improved news on soy and other oilseed crops both from
India and from the U.S., which has seen some improvement in weather of late.
India will see higher prices partly due to a higher Minimum Support Price (MSP)
which should combine with a smaller crop (we still feel that yields will be
lower despite the news from plantings, but perhaps not a disaster, certainly
not worse than in 2009). The only risk now from India is the possibility of an
Minimum Export Price (MEP) being imposed, and we feel that the pressure on this
will come from non-grain sources, like pulses, oilseed, corn and sugar and
needless to say, any decision from India will likely have a strong dose of
politics within. For now, sources suggest that there is no reason to curb grain
exports, but most also admit that pressures elsewhere in the agronomy, and food
inflation could swing decisions.
Nigeria demand is back! But softer than H1 2012. There is also some Nigerian interest that seems to be
at the back of price increases seen in Thailand, India and South American
origins, for parboiled rice, as talk of a 100% import tariff rate in the New
Year has spurred some buying though it is also clear that the buying is not as
strong as the wave we saw in the first half of 2012. There seems more questions
about whether the government would go ahead with this plan, which was announced
on 11 Dec 2011 during the Nigerian budget as presented by President Goodluck
Jonathan. We will have to keep a keen eye on this development.
La Niña gives way to El Niño, is one which we feel could tilt the mood in markets
more than many think. All eyes are now on what meteorologists all over the
world describe as a shift from La Niña (typically associated with floods and
excess rains) to El Niño (typically associated with dry weather and drought).
This is expected to happen from Sep, and if we look around, we already hear of
floods in China, monsoon weakness in India, dry weather apparently in Cambodia
(though we feel its more about cross border rice movements that don’t make it
to official figures), and the possibility of dry weather impacting markets for
2013.
Prices higher this week, but longer term remains
cloudy, and split in views. We feel
that market prices could see an upside after Sept, but prices are already
higher, with Vietnam and Pakistan looking tight for brokens. Viet WR 5% is at
$440-45 PMT levels, Indian WR 5% is at $430 PMT and Indian parboiled rice at
$415 PMT for 5% grades while Thai PB 100S sits at $600 PMT thanks to the recent
Nigerian interest we have pointed out – albeit the wave is not as strong as
before. Myanmar prices were also seen at $370 PMT and higher for Emata 25%, but
with the monsoon, loading is slow and the only stocks remaining seem to be in
the hand of the MRIA while the rest of the market seems to be waiting for the
next crop. There is a general sense of tightness that backs the current price
increases and the fact that many markets are waiting for the next harvest also
support these higher prices – but everyone also watches Thailand and India for
signals from policy-makers.
There is still a lot of
apprehension in the market, and the trade looks split on its view to just where
the markets will go. We hear and equal measure of bearish talk, mostly on
account of pressures from Thai stocks, to a more bullish outlook from many who
feel that it may not be in the interest of Thailand to release and drop prices.
Even a decision for India to continue exports do not tend to suggest
bearishness, only Thailand seems to be able to evoke the “bear” in this market.
The jury is out on a trend as there are many undercurrents pushing and pulling
on price views. For now, markets look relatively firm until Thailand’s decision
on stocks, release and price is understood.
Price
Indications
|
||||||
21-Aug-12
|
Thai
|
Viet
|
Pak
|
India
|
U.S.
|
S.
Amer. |
100B
|
580
|
|||||
5%
|
565
|
440
|
450
|
430
|
580
|
585
|
10%
|
560
|
435
|
440
|
567
|
575
|
|
15%
|
555
|
425
|
430
|
550
|
545
|
|
25%
|
545
|
410
|
400
|
380
|
525
|
525
|
A1
Super or Brokens (sortexed)
|
505
|
390
|
350
|
345
|
360
|
|
Fragrant
A1 Super
|
560
|
|||||
Parboiled
100S or 5% for Pak / Ind
|
600
|
460
|
415
|
630
|
||
Hom
Mali 92% Purity or Jasmine Rice Equivalent (5%)
|
1030
|
640
|
||||
Note: Pakistan - holiday. MEP in Vietnam 4 Jul 12
as WR 35% 375 ; Glut 10% Viet $510-530 PMT - Viet brokens still very tight
|