1. An Outlook For The Rice
Price 2010-2011
and Beyond
Milo Hamilton
Firstgrain
October 11, 2010

2. The Rice Price 2010-2011
About the Presenter
• Milo Hamilton is co-founder of Firstgrain, a
global rice market advisory service (est. 2000)
• Bought rice for Uncle Ben’s Inc. for 18 years
• Clients include: farmers, millers, traders,
government agencies, rice buyers
• Helped start and develop US rice futures
• Relates all markets to the rice market
2 October 2010

3. The Rice Price 2010-2011
"The precious things are not pearls and jade
but the five grains, of which rice is first.”
-Chinese saying
3 October 2010

4. The Rice Price 2010-2011
Outline
• Short-term rice price outlook and driving factors
• Longer term price outlook with status quo
• Problems with the rice market
• Obstacles to change
• Solutions to obstacles
4 October 2010

5. The Rice Price 2010-2011
Short-Term:
Price Drivers in next six months
• The loss of wheat and coarse grain production
• Weather and Climate factors:
– 2009 Monsoon and El Nino rice loses
– 2010 flooding and droughts
– US Rice production loses in 2010
• Convergence or divergence of paddy prices
• Price objectives of US rice futures
– With rise in Asian prices
– Without rise in Asian prices
5 October 2010

6. The Rice Price 2010-2011
$600
World LG Rough Rice Prices (USD/MT)
$500
$400
$300
$200
$100
US Rough Futures Brazil Thailand Vietnam India China
$0
Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06
6 October 2010

7. The Rice Price 2010-2011
7 October 2010

8. The Rice Price 2010-2011
Long Term Outlook: Status Quo
• Huge budget requirements for input subsidies
• Serious depletion of groundwater assets
• Inflation-adjusted rice prices (could) return to
spiked highs of 1916, 1946, 1973, not just 2008
prices
8 October 2010

9. The Rice Price 2010-2011
Long Term Outlook: Status Quo
• Despite 2008, food grain prices are relatively flat
• Rice is cheap to crude oil
• Water is not priced
• Rice price volatile to wheat, due to thinness of
world rice trade?
9 October 2010

10. The Rice Price 2010-2011
$160
Nominal Prices
$140
$120
$100
Milled Rice (USD/cwt) FOB Mill
Crude (USD/barrel)
$80
$60
$40
$20
$0
1909 1915 1921 1926 1932 1937 1943 1948 1954 1959 1965 1970 1976 1981 1987 1992 1998 2003
10 October 2010

11. The Rice Price 2010-2011
$4,500
Real Prices (in 2008 Dollars)
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
"Milled Rice (USD/MT) FOB Mill"
$500
$0
1909 1915 1921 1926 1932 1937 1943 1948 1954 1959 1965 1970 1976 1981 1987 1992 1998 2003
11 October 2010

12. The Rice Price 2010-2011
$150
Rice Minus Wheat (USD/MT)
$100
$50
$0
-$50
-$100
-$150
1914 1924 1934 1944 1954 1964 1974 1984 1994 2004
12 October 2010

13. The Rice Price 2010-2011
The Problem with the Rice Price
• Some want it very low
• Some want it high
• Some want it “fair” or “just right”
• Current obstacles can send the rice price very
high
13 October 2010

14. The Rice Price 2010-2011
Obstacles to Change
• Government manufactured rice prices
– Giving away water
– Inputs cheap or free
– GMO ban
– Shutting down price discovery
– Keep farmers in the dark
– Self-sufficiency at all costs
– Rejecting world trade as partial solution
14 October 2010

15. The Rice Price 2010-2011
Cost of Water
"Egypt cut by almost half the amount of land it
used to sow rice in 2010 versus the previous year,
saving the country 5-6 billion cubic metres of
water, the official state news agency MENA said
on Thursday.”
15 October 2010

16. The Rice Price 2010-2011
Cost of Water (continued)
“The amount of land on which rice was grown was
reduced to 1.2 million feddans (1.2 million acres)
from 2.2 million last year, MENA said, citing the
Water Resources and Irrigation Minister
Mohamed
NasreddinAllam.”
This implies one million acres = six billion cubic
meters of water - Reuters story, 19 August 2010
16 October 2010

17. The Rice Price 2010-2011
“In times of change, the future belongs to the
learner, while the learned find beautiful ways to
cope with a world that no longer exists.”
-Erick Hoffer
17 October 2010

18. The Rice Price 2010-2011
Solutions to Obstacles
1. Let rice trade freely
2. Pursue food security through direct subsidies to
the poor
3. Turn bottom of the food pyramid into informed
business people
– With mobile information technology
18 October 2010

19. The Rice Price 2010-2011
Solution 1: Freely Traded Rice
• Reject trade disruption
– Embargoes, export bans undermine trust
• Support rice futures markets
– Price discovery
– Merchandizing mechanism
– Reduced risk of default
– Global milled futures contract in Singapore?
19 October 2010

20. The Rice Price 2010-2011
Solution 2: Redefine Food Security
• Food security does not equal self-sufficiency!
– Self-Sufficiency: Eat what you grow, grow what you eat
• Vulnerable to crop failure
– Food Security: Purchasing power to buy food
• Requires robust international market
• Replace input subsidies with targeted cash
transfers to the poor
– Gives poor the capability to feed themselves
20 October 2010

21. The Rice Price 2010-2011
Solution 3: Empower the Farmer
• Example: Reuters Market Light (RML)
• Sends market and agronomic information to
farmers via text message in India today
– 300,000 subscriptions
– 60,000 active accounts
– 1.5 million farmers accessing RML information
• Every individual is a market force
21 October 2010

22. The Rice Price 2010-2011
Reuters Market Light
22 October 2010

23. The Rice Price 2010-2011
“If you farm as a way of life, it could be a very
expensive business.
But if you farm as a business, it can be a very
rewarding way of life.”
-Merrill Oster
23 October 2010

24. No Farmers,
No Food