Indonesia rushes to boost rice stockpiles, Philippines holds fire

Feb 9 (Reuters) - Indonesia on Wednesday aimed to lift its rice stockpiles by a third as it struggles to fight food inflation, though steady buying by top importer the Philippines and a bumper crop from top exporterThailand may ease market pressure.

Traders said other governments in the region and further afield may also look to increase stocks despite ample supplies in Thailand and No. 2 exporter Vietnam to quell food inflation.

"Rising supply from the world's top two exporters is likely to weigh prices down. However, there could be steady demand from traditional buyers such as the Middle East, African countries and demand elsewhere in Asia that could help support prices," said Kiattisak Kallayasirivat of trading firm Novel Agritrade.

Thai rice rose to $545 per tonne from last week's $540 per tonne on the back of loading demand after exporters committed last month to sell 820,000 tonnes of rice to Indonesia.

Indonesia asked state procurement agency Bulog to lift rice imports to 2 million tonnes on Wednesday, which followed the country surprising markets last month by buying five times as much rice as expected, while the Philippines also on Wednesday said it may import less than 1 million tonnes planned this year despite a recommendation from a government agency to go above that level.

Benchmark Thai 100 percent B grade white rice prices RI-THWHB-P1 are likely to rise to $550 a tonne by the end of February and $567.5 a tonne in March from around $540 a tonne now, given expectations of additional orders from Indonesia, Bangladesh and Sri Lanka, according to a Reuters poll.

But rice has lagged other staple grains last year, falling 13 percent while corn and wheat surged 50 percent. Rice prices have only gained 2 percent this year and are far below a record $1,050 a tonne hit in 2008.

Reuters technical analyst Wang Tao sees Thai white rice rising into a range of $630-$673 per tonne over the next three months

Even at that level however, supplies of CBOT rough rice , now trading around $313.5 a tonne, are unlikely to flow heavily into Asia as local grades are preferred.

Still, perceived panic buying by governments as global food prices have climbed to record highs in recent months on shrinking supplies of wheat, corn and oilseeds has kept the market watchful.

Indonesia surprised markets last month by buying nearly five times as much rice as expected, and then suspended rice import duties in a move that signalled it could look to stockpile more.

Growing Asian demand and speculation over panic buying has already pushed prices for the grain higher, adding to inflation that hit a 21-month high of 7 percent in Indonesia last month, though Thailand and Vietnam are poised to see new harvests.

Indonesia's government met to discuss food security on Wednesday and chief economic minister Hatta Rajasa said it would gradually lift stockpiles from a current 1.5 million tonnes, underlining its fears over shortages leading to price spikes.

Food price inflation led the central bank to hike interest rates last week for the first time in two years, and protests over food prices were seen as a major factor in the ousting of Indonesia's long-term autocratic ruler Suharto in 1998.

NEW CROPS

Other traders said rice prices could drop in the coming weeks on increased supply because Vietnam, the world's second biggest rice exporter, is due to start harvesting its major winter-spring rice crop by end-February.

Vietnam's winter-spring rice crop accounts for around 48 percent of the country's total rice production of around 39-40 million tonnes and most of the output are for exports.

"Prices will fall in March as there are no more government deals while the Philippines has not detailed its importing plan but it may buy less than last year," a trader said.

Thailand is also about to start harvesting its second crop, expected to be around 9.5 million tonnes, the highest ever and well above 8.8 million tonnes last year.

Indonesia's own harvest will start in March, when it sees prices starting to ease and imports are not allowed to avoid damaging farmer earnings. The country said it had already secured 1.33 million tonnes of imports by December.

Indonesia has set a target to produce 69 million tonnes of unmilled rice this year, up from 65 million tonnes in 2010.

Its import buying is a turnaround from minimal purchases last year and shows efforts by Southeast Asia's biggest economy to be self-sufficient in the staple have not succeeded.

Indonesian President Susilo Bambang Yudhoyono has called on people to start planting food at home, and told the World Economic Forum in Davos that the next economic war could be over the race for scarce resources, due to growing populations.

By contrast in the Philippines, policymakers appear not to be overtly worried about rising food costs -- the central bank is expected to leave policy rates unchanged at a record low on Thursday, and has said there is no evidence that commodity prices are spilling over into the broader economy.

The country may buy less than 1 million tonnes of rice this year despite a government panel recommendation for a higher purchase volume, with forecasts of a good first quarter crop, a government official said on Wednesday.

Early rains this year have helped rice crops and along with hefty stockpiles from previous years' imports, gives Manila -- the world's biggest buyer in recent years -- room to buy less than the record 2.45 million tonnes it purchased last year.

"We are preventing over-importation because our farmers will be disadvantaged," said agriculture secretary Proceso Alcala. (Additional reporting by Karen Lema, Erik dela Cruz and John Mair in MANILA, Apornrath Phoonphongphiphat in BANGKOK, Fitri Wulandari in JAKARTA and Ho Binh Minh in HANOI; Editing by Ed Lane)

(Source: http://www.reuters.com/article/2011/02/09/asia-rice-idUSL3E7D90GB20110209)