Monday, December 6, 2010
Rice May Triple in 18 Months as Supplies Tighten, Duxton's Peter Forecasts
Rice, the staple food of more than three billion people, may as much as triple in 18 months as flooding in exporters including Thailand tightens supplies 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.
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.
Global production will be 697.9 million tons, 6.5 million tons smaller than previously estimated, as crops around Asia “deteriorated,” the FAO said in a report yesterday. That’s the third forecast cut since April.
Rough rice on the Chicago Board of Trade gained as much as 1.7 percent to $14.115 per 100 pounds today, extending an advance from the year’s low of $9.55, which was set on June 30. In 2008, the price peaked at $25.07 per 100 pounds.
“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.
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