Bloomberg
The world may soon pay more than ever for its most abundant food: rice.

A record crop this year in a market anticipating rising production costs will do little to slow the rally for the staple of 3 billion people. As China, the No. 1 consumer, and Vietnam, among the biggest exporters, continue to plow under their paddies, rice will double within two years to almost $20 per 100 pounds from $9.90 now, according to Stephan Wrobel, chief executive officer at Diapason Commodities Management SA in Lausanne, Switzerland, which oversees $5.5 billion...

``You have more and more people in the world and yields are not rising as quickly as the increase in population,'' said Mamadou Ciss, 45, managing director at Ascot Commodities NV in Geneva, which traded 1.3 million tons in 2005, or almost 5 percent of the international market. ``World stocks are very, very tight.'' Ciss expects prices to double in three years...

Falling Output

In the U.S., which ranks 11th in world production, rice output is falling. Costs for irrigating rice have gained $1.75 for each 100 pounds in the past year, said Milo Hamilton, president of First Grain Advisory Services in Austin, Texas. U.S. production will fall 12 percent this year to 197.2 billion pounds from a year ago because of fewer plantings and hot weather, the government said Aug. 11.

``Farmers have cut back fertilizer and mined the soils, which will show up as lower yields,'' said Hamilton, former head buyer for 18 years at Uncle Ben's Rice, a subsidiary of Mclean, Virginia-based Mars Inc. ``Prices are too cheap to prevent acreage cuts in 2007.''...

A developing El Nino weather pattern threatens to reduce rice harvests. The last strong El Nino event in 1997 and 1998 led to record global imports by Indonesia, the third-biggest producer and consumer of rice.

(14 Aug 2006)

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