$20 Rice By '08?

Several of our readers this week forwarded a Reuters article that is quite bullish on rice prices, to the point that one analyst predicts that prices will double by 2008. Here’s a brief sysnopsis:

• $20 by '08? Stephan Wrobel, CEO of Swiss-based Diapason Commodities Management SA, said rice prices will double within 2 years to almost $20 per hundredweight, up from the current price, which has been hovering around $10 lately. His company oversees $5.5 billion in investments.
• Less farmland in China. Loss of rice acreage in China to urban development and highways was cited as one reason for an upswing. The country has lost 19.8 million acres (or about 6.6%) of its farmland in the last decade, based on a government report.
• Tight stocks. Supplies continue to be tight, the article noted. Unsold rice stocks this year are half what they were in 2000. China’s preharvest stock will be the lowest since 1975.
• Acreage shifts. Fertilizer and irrigation costs are forcing some farmers to reduce rice acreage in favor of grains or other crops that are cheaper to grow.
• Slower yield gains. Overall production also isn’t increasing in proportion to rising population levels.
• Specs and hedge funds are bullish. A money-manager with another Swiss-based investment firm said that rice may be the second-best ag investment right now behind “the ethanol-powered corn market.”
• Weather. Some areas in the world have seen production gains recently, but much of that is due to favorable weather. What might be an evolving El Nino weather pattern also could affect production of rice and other grains in the southern hemisphere, said Drew Lerner, president of World Weather Inc. in Kansas City, Kansas. Conditions have turned wet in the North China Plain, pointing to a growing El Nino influence.

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