Rice futures to extend current rally; output may decline 10%

09:27, July 21, 2010      

Email | Print | Subscribe | Comments | Forum 

Rice futures are expected to extend a rally that began in early July as torrential rains across southern China may result in lower production levels of the grain.

Heavy rains combined with crop damage from insects are estimated to have cut rice output in China by 10 percent, with some major farming areas forecasting a 20 percent production decline, according to cngrain.com, a website owned by China Grain Reserves Corp, a State-owned entity that stockpiles grain.

The harvest of the early indica type rice may be delayed by seven to 15 days, the site reported.

"The situation is worse than expected and a postponed harvest will have an adverse impact on late indica rice crops, which have yet to be sown," said Jing Zhuocheng, an analyst at Shanghai CIFCO Futures Co.

Early long-grain non-glutinous rice for January delivery, the most active grain contract on the Zhengzhou Commodity Exchange in Henan province, traded 0.05 percent higher than Monday's settled price to close at 2,146 yuan per ton on Tuesday.

The contract has cumulatively advanced 3.7 percent so far in July, after a persistent drop of 5.7 percent from April 22 to June 30.

"The expected output drop may attract more speculative cash into the market, pushing up futures' prices to a higher level," sad Ding Sunya, an analyst at Wanda Futures Co Ltd.

As of July 12, adverse weather has washed out 1.13 million hectares of field crops in eight provinces and cities, including Hunan and Jiangxi provinces, which are the nation's main rice-growing areas, according to the Ministry of Agriculture.

The supply deficit may raise the purchase price of rice, analysts said.

China, the world's biggest consumer of rice, has set minimum purchase prices for the crop, under which the government will buy up rice when the market price is below the State-set level in order to protect farmers' interests.

This year's minimum purchase price is set at 1,860 yuan per ton. Analysts estimate that purchase prices in Hunan province will be higher at 1,900 yuan per ton.

Farmers may be reluctant to sell their products, however, as they may expect higher prices - following the tactic used by wheat farmers, and thus reducing supply, Jing said.

But analysts also said the huge stockpiles of the grain amid the expansion of the growing area this year, may partly offset output losses by erasing the gap between supply and demand.

Currently, rice stocks remain at sufficient levels, and as such, the futures market may lose steam for further growth, Ding said, adding that output for late indica rice crops may suffer more losses if a drought were to follow the recent floods.

Source:China Daily

(Editor:黄蓓蓓)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • Chinese President Hu Jintao watches the launch of Tiangong-1 space lab module at Beijing Aerospace Control Center in Beijing, capital of China, Sept. 29, 2011. Other members of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, including Wu Bangguo, Jia Qinglin, Li Changchun, Xi Jinping, Li Keqiang and Zhou Yongkang, are also present. (Xinhua/Rao Aimin)
  • The graphics shows the launch procedures of the carrier rocket of Tiangong-1 space lab module, Long March-2FT1 on Sept. 29, 2011. (Xinhua/Lu Zhe)
  • Image taken from Beijing Aerospace Control Center shows a Long March-2FT1 carrier rocket loaded with Tiangong-1 unmanned space lab module blasting off from the launch pad at the Jiuquan Satellite Launch Center in northwest China's Gansu Province, Sept. 29, 2011. (Xinhua)
  • On Sept. 28, tourists travel around the Mingshashan Scenic Area in Dunhuang, Gansu province by camel. With the National Day vacation right around the corner, more and more tourists from home and abroad are going to Dunhuang. Riding on a camel, they travel in the desert to enjoy the cities rare form of natural scenery. (Xinhua/Zhang Weixian)
  • Chinese forest armed forces work together with forest firefighters on Sept. 28. (Xinhua/Chai Liren)
  • Photo taken on Sept. 29, 2011 shows strong wind blows trees in Sanya, south China's Hainan Province. Typhoon Nesat heads towards south China and is moving at an average wind speed of 20 km per hour toward the west coast of China's Guangdong Province. (Xinhua/Hou Jiansen)
Hot Forum Discussion