500,000 tonnes of rice at US$1,200 per tonne
Phillipine rice purchase may set world rice prices
By Jon Fernquest |
Today's Bangkok Post covers one of those large rice buying contracts made by a whole country that can determine the world price of rice.
These contracts are so big (500,000 tonnes of rice) that they can actually set the price, causing it to jump to new record-high prices.
Rice prices have tripled since the beginning of 2007 and rice futures on the Chicago Board of Trade have been setting new records recently.
For further reading check out the Economist's charts of rising food prices and an article on global food shortages.
Here is the article in full:
AGRIBUSINESS
Manila buys rice at record prices
Thai suppliers still reluctant to sell
PHUSADEE ARUNMAS
Friday April 18, 2008
Rice prices are expected to rise further if the Philippines agrees to buy the produce from Vietnam at prices as high as US$1,200 per tonne, said local rice traders.
A tender by the Philippine government to buy 500,000 tonnes of rice attracted offers to sell only two-thirds of the amount sought, reflecting a supply squeeze, Chookiat Ophaswongse, president of the Rice Exporters Association, said yesterday.
Traders offered only 334,000 tonnes of rice, with prices ranging from $872.50 to $1,220 a tonne, sharply higher than just over $700 that Manila paid in March.
Of the total, Thai rice exporters offered 200,000 tonnes at $1,070 to $1,150 each, free on board, while Vietnam offered 110,000 tonnes at $1,200 each, and Pakistan offered 24,000 tonnes at $870 each for May and July deliveries.
Mr Chookiat said the offer prices quoted by both Thailand and Vietnam were high because of their reluctance to sell. "How far the rice prices would go will rest on the final decision of the Philippine government whether it would agree to the offered prices over the next five working days," he said.
"If it agrees, we'll have to wait and see whether other buyers will accept those prices."
In a bid to secure rice supplies for the local market, he said Manila planned to call a tender for another 500,000 tonnes of rice on May 5 but on a government-to-government basis.
The prospect is highly unlikely that the bids would attract the full amount, as both Thailand and Vietnam have been flexing their muscles to protect their rice stockpiles for food security, he said.
In Bangkok, Thai 100% B-grade white rice, considered the world's benchmark, hit a record $950 per tonne free on board in Thursday's tender, having trebled since the start of 2007.
Traders in Bangkok said other grades of rice from Thailand, were also quoted higher.
Thai 100% parboiled rice was sold at $960 a tonne to African countries for May and June shipments, while Thai 100% premium-grade fragrant rice was sold at $1,200 per tonne to Hong Kong and US importers.
The Chicago Board of Trade's July rough rice futures rose on Thursday to $23.375 a hundredweight, surpassing the previous all-time high of $23.20 set in US trading on Wednesday. According to Mr Chookiat, Thailand was confident in maintaining its shipments of nine million tonnes this year and insisted the local rice supply is more than enough for local consumption.
Thailand produces annually about 19 million tonnes of white rice, with local consumption making up about nine million to 10 million tonnes, and the rest destined for export.
On top of that, the Thai government has about 2.1 million tonnes in its stockpile, and the private sector has another 2.1 million tonnes of stock on hand.
Commerce Minister Mingkwan Sangsuwan said recently that the value of rice exports from Thailand, the world's biggest supplier, rose by 66% in the first quarter from a year earlier thanks to record-high prices.
(Source: Bangkok Post, business, page B1, 18-04-08, PHUSADEE ARUNMAS, temp-link)
Vocabulary:
agribusiness - the various kinds of businesses involved in food production, including farming, seed supply, agrichemicals, farm machinery, wholesale and distribution, processing, marketing, and retail sales (See Wikipedia)
reluctant to sell - unwilling to sell, hesitating to sell, slow to sell
a tender - a formal offer to supply goods at a price
call a tender - ask for offers to sell
a supply squeeze - a period with low supply in the market
reflecting a supply squeeze - shows that there is a low supply in the market
Free On Board (FOB) - when shipping goods, FOB indicates that the supplier pays the shipping costs (including insurance) from manufacturer to destination
futures, futures contracts - a contract buying for future delivery, often used to hedge and protect an investment or commodity position (See Wikipedia on futures contracts)
a position, a financial position - a situation, a financial situation, the combination of different commodities or financial assets you hold or own
hedge - reducing the risk of holding an asset and having its price decrease, by purchasing new assets whose price tends to move in the opposite direction (See The Economist glossary)
for May and July deliveries - will provide the good in the future, a futures contract (See above)
X will rest on the final decision of Y - what happens to X will depend on a decision by Y
done on a X-basis - done according to method, system, or principle X
on a government-to-government basis - done between two governments (without private companies being involved)
flexing their muscles - showing other people how powerful they are (like a bodybuilder showing people how big his muscles are)
stockpiles - large quantities stored for future use (See glossary)
food security - having a reliable supply of food to feed the population of your country (See Wikipedia)
the world's benchmark - the world standard of comparison and measurement (See glossary)
trebled - increased to a level three times (3X) greater than it was previously
parboiled - partially pre-cooking by boiling in water (See Wikipedia)
Chicago Board of Trade - the world's oldest commodities futures exchange, started in 1848 in Chicago at the center of America's agricultural heartland and railway network, merged with the Chicago Merrcantile Exchange in 2007, nowadays financial futures and options are just as important as commodities futures (See Wikipedia)
surpassing - going beyond previous high levels
record-high prices, record prices - the highest prices that have ever existed in this market
all-time high - the highest level for all time
X making up Y - X adds amount Y to the total amount
stock on hand - the quantity of a good available to sell
local consumption making up about nine million to 10 million tonnes - local consumption contributes or accounts for nine million to 10 million tonnes of the total amount
