Jun 15, 2008, 6:09 GMT
Bangkok - 'Even if you become a saint, you cannot predict rice prices,' goes an old Chinese proverb.
Even so, the rice gurus of Thailand - the world's largest rice exporter for the past four decades - may be in a better position than most to predict the future.
And according to some of them, the long-term price prospects for the world's most popular grain are looking pretty good.
'I personally believe we are now in a sellers' market,' said Vichai Sriprasert, honorary president of the Thai Rice Exporters Association and CEO of Riceland International, the seventh-largest rice exporter in the country.
'The rice market has been a buyers' market for the perhaps 40-50 years, since the Green Revolution when new technologies introduced in the mid-1960s made it possible for farmers to produce more rice and grow rice two to three times a year,' Vichai said, addressing a seminar on the world food crisis hosted by the Konrad Adenauer Organization in Bangkok.
Thailand has been the world's top rice exporter since the mid-1960s, after the world's former leader, Myanmar, fell under military rule in 1962 and its exports fell into a steep and steady decline.
In 2007, Thailand's rice exports hit a historic high of 9.55 million tons, earning the country 3.6 billion dollars.
During the first four months of 2008 rice exports had already reached 4.07 million tons, earning the kingdom 1.91 billion dollars, a hike of 73 per cent over the same period last year.
Rice prices have more than doubled this year, driven up by several short- and long-term factors that have created a highly volatile market.
However, one thing noticeably missing in the price equation has been any shortfall in rice production, which has been relatively steady throughout 2007 and 2008 and certainly enough to meet demand in Asia, where 90 per cent of the rice market resides.
'The wheat market was the one that had a shortfall and the culprit was Australia, that has suffered several years of drought,' said Ammar Siamwalla, Acting President of the Thailand Research Development Institute.
It is now accepted that this year's rice crisis started in India, which slapped a ban on its rice exports in early 2008 to guarantee domestic food stability in case the country of 1.1 billion people suffered a wheat shortage due to uncertain imports from Australia.
The Indian ban prompted Vietnam to announce its own export ban in April, which helped jack the world rice price up to 1,100 dollars a ton in June, compared with 340 dollars a ton in November.
Both India and Vietnam, the two largest rice exporters after Thailand, have now lifted their export bans and prices are starting to edge down on the world market.
'I think the price of nearly 1,000 dollars a ton will not be sustainable,' predicted Ammar, one of Thailand's top rice experts.
'Assuming no adverse natural events in producing areas, rice prices will probably slide back to reestablish a relationship with other cereal prices, in particular with the maize price,' Ammar predicted.
One such adverse natural event was last month's Cyclone Nargis in Myanmar, which is expected to cause a 3-million-ton shortfall in the country's rice crop this year, the impact of which has yet to be felt on the global rice market.
Maize prices have experienced a slow but steady increase, almost doubling over the past four years, and are likely to continue to do so, driven up by growing demand of food and bio-fuels, Ammar said.
Although rice is not a likely candidate for producing bio-fuels in the future, the possibility of more land going towards bio-fuel crops, such as maize and palm oil, and away from rice, is one of the long-term factors that is expected to keep rice prices high in the future.
Another obvious factor is oil prices.
'Fertilizer and transportation all require oil, so when oil goes up the price of rice also goes up,' Vichai said.
During the last oil crisis of 1973-74, rice prices reached a historical peak of 2,700 dollars a ton, Vichai recalled.
'Besides the oil crisis, the second thing affecting price is technology,' he said 'Our technology is out of date and we have not invested in in the rice industry, in irrigation and research and development, especially Thailand.'
Without investments in new technology, it is unlikely that rice production will be able to keep up with world demand which increases by an estimated 80 million new rice consumers each year.
So far the Thai government, however, has shown more interest it bolstering rice prices for farmers and lowering them for consumers rather that tackling long-term solutions for the rice industry.
'The government is interested in only two things: getting campaign funds and the popular vote from the farmers,' Vichai said.