Dec. 1 () -- Rice, the staple food of more than three billion people, may as much as triple in 18 months as supplies tighten after flooding in exporters including Thailand and demand climbs, according to Duxton Asset Management Pte.
“Rice will blow out the stocks,” said Ed Peter, chief executive officer, who co-founded the company last year with Managing Director Desmond Sheehy. Both worked at Deutsche Asset Management and the Deutsche Bank AG unit owns 19.9 percent of Duxton, while Peter, Sheehy and staff own the rest. Duxton, based in Singapore, invests in farmland, Asian stocks and wine.
Peter’s forecast, in an interview on Nov. 29, would put rice at more than the peak during the 2008 food crisis, which triggered social unrest in poorer states. Wheat and corn also surged that year, while record oil prices boosted fertilizer costs. Kiattisak Kanlayasirivat at Novel Commodities SA, which trades rice, said farmers can replant quickly as floods recede.
“A price increase of 10 percent to 20 percent would be considered quite a lot, not to mention double or triple,” said Kiattisak, a director at Novel Commodities’s Thai office, which handles about 1.5 million metric tons of rice a year.
Thai 100-percent grade-B white export rice, the Asian benchmark, peaked at $1,038 per ton in May 2008. The grain was at $551 last week, up 15 percent since the end of June, according to the Thai Rice Exporters Association. “Prices will triple over the next 18 months,” Peter said in the interview.
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Duxton oversees about $600 million, allocating 50 percent to farmland in Australia, Argentina, Zambia and Tanzania and about 45 percent to Vietnamese shares. Peter had headed Deutsche Asset Management for Asia Pacific, Middle East and North Africa, while Sheehy was in charge of that unit’s complex-asset team, which focuses on non-traditional investments including farms.
The most severe floods in five decades in Thailand, the top exporter, may trigger a 7 percent fall in rough-rice production, which accounts for 70 percent of its total output, the Agriculture and Cooperative Ministry has said. Crops in Vietnam and Pakistan have also been hurt by severe weather, while a typhoon cut harvests in the Philippines, the biggest importer.
Rice inventories held by the world’s five biggest exporters will likely decline next year, tightening supply, Concepcion Calpe, senior economist at the Food & Agriculture Organization said in October. Prices were “unlikely to fall,” Calpe said.
At the end of the 2010-2011 marketing year, world stockpiles stood at 94.266 million tons, 1.2 percent less than the previous year’s estimate, according to U.S. Department of Agriculture data posted on its website.
“Rice is a long-term bet,” Duxton’s Sheehy said. Farm products including rice may outperform metals and fuel over the long term as the global population expands, Sheehy said.
Rice on the Chicago Board of Trade jumped 37 percent from the end of June, beating the advances in gold, copper and oil, three commodities that are more traded among investors than the cereal. Chicago futures were at $13.99 per 100 pounds today.
“Once floods subside, farmers can start new crops,” Novel’s Kiattisak said. Thai state stockpiles are about 2 million tons, he said. A Thai crop matures in four months.
--With assistance from Luzi Ann Javier in Singapore and Supunnabul Suwannakij in Bangkok.
By Chanyaporn Chanjaroen
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Wednesday, December 1, 2010
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