New Delhi, 27 May 2010

Asian benchmark rice prices are set to fall further due to swelling supplies, reviving prospects of an OPEC-like cartel of key producers, the head of a leading Indian rice trading firm said on Thursday.

The idea of an OPEC-like cartel failed to take off after initial deliberations two years ago when the world faced an acute shortage of the staple, driving benchmark prices in Thailand to a record high of $1,000 a tonne.

"I now see a possibility of an alliance of producers like Thailand, Vietnam, China and India, among others. It will bring stability in prices which are heading southward," Karan A Chanana, managing director of the Amira group, a leading rice producer, told Reuters in an interview.

A body of key rice producing nations will help stave off expected fall in prices in both India and Asia, said Chanana, also a former secretary-general of the All India Rice Exporters Association.

The price of 100 B grade Thai white rice, at $460 per tonne, has fallen more than a quarter since the middle of December, and traders in the Thailand, the world's top exporter, say prices are expected to drop further due to swelling supplies in the region.

Export Ban

While forming a consortium of producers would arrest a sharp drop in Asian prices, lifting a two-year old ban on exports of non-basmati rice would help India avoid a glut. "The government must allow exports of non-basmati rice after the monsoon season to avoid any excess stock. There is a case for non-basmati exports now," Chanana said.

The government prefers to watch the progress of monsoon before easing trade curbs, as the annual June-September rains irrigate 60 percent of the country's farms.

India, the world's second-biggest producer of the grain, clamped down on exports of common grades of rice in 2008, joining other leading producers in their protectionist measures to bolster domestic supplies.

India has also fixed a floor price of $900 per tonne for exports of aromatic premium basmati rice, exclusively grown by India and Pakistan in northern parts. Output has risen since then.

The farm ministry has forecast rice harvests at 89.31 million tonnes in the crop year to July against its previous estimate of 87.56 million tonnes.

"Not only rice harvests look better, our godowns are full. There is hardly any space to store grains," Chanana said. The country's rice stocks more than doubled to 26.2 million tonnes on May 1 against a target of 12.2 million tonnes.

To trim huge stocks, India has shipped some rice to its neighbours such as Nepal, Sri Lanka and Bangladesh. Although Chanana favoured lifting the ban on non-basmati rice exports, he said the government should not cut the floor price for exports of basmati.

"Buyers must pay a premium for basmati," he said.

Ends --