FOA says "Unreasonable" rice prices seen easing

By Sambit Mohanty Reuters - Tuesday, April 29 09:09 am

BANGKOK (Reuters) - Rice prices are expected to ease as countries rush to boost output, but the market is unlikely to return to levels seen in recent years, the Asia head of the U.N. Food and Agriculture Organization said on Tuesday.

"High prices will be there but current prices are unreasonable," He Changchui, FAO's assistant director-general and regional representative for Asia-Pacific, told Reuters.

"I think the current market price has been distorted."

There are signs that prices may have peaked after setting record highs earlier this month amid fears of tight world supplies.

Chicago Board of Trade rice futures extended their losses on Tuesday after an official in Thailand, the world's biggest rice exporter, said prices could ease by 20 percent as supply from a new domestic crop hit the market.

Rough rice for May delivery fell 2.4 percent to $22.74 per hundredweight in early Asia trade, while both July and September contracts dropped more than 3 percent.

The FAO regional chief said some countries are expecting bumper crops while others are taking steps to boost their future production. But consumers may not get immediate price relief.

"In the short term, we are hoping that it will ease the market situation. But we should not anticipate that consumers will get rice at those original levels. Prices have remained too low for too long," He said.

In a bid to stem the rise of local rice prices, Thailand said on Tuesday it would gradually release 2.1 million tonnes of rice from government stockpiles for domestic use.

"We will gradually sell it domestically," Yanyong Puangrach, head of the Ministry's Department of Internal Trade told reporters after the plan was approved at the weekly cabinet meeting.

The government will replenish its stockpile by purchasing paddy harvested in May and June at market prices, he said.

Thailand expects to produce some 4.2 million tonnes of milled rice from a smaller second crop due to be harvested by May, according to the Commerce Ministry.

Some 1.6 million tonnes of additional paddy, equivalent to 1 million tonnes of milled rice, is due to hit the market in June when farmers harvest this rare third crop planted to take advantage of prices topping $1,000 per tonne.

(Editing by Darren Schuettler and Ben Tan)

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