Rice futures slumped by their daily limit of 50 cents for a second day on Tuesday after Cambodia said it will lift restrictions on exports

By Moming Zhou, MarketWatch
Last update: 12:41 p.m. EDT May 27, 2008
SAN FRANCISCO (MarketWatch) -- Rice futures slumped by their daily
limit of 50 cents for a second day on Tuesday after Cambodia, one of
the world's top 10 rice exporters, said it will lift restrictions on
exports.
Cambodia will resume rice exports Tuesday after a temporary two-month
ban, the country's Prime Minister Hun Sen announced on Monday,
according to the Associated Press. Rice futures trading on the Chicago
Board of Trade tumbled 50 cents to below $20 per 100 pounds.
Futures prices also slumped by 50 cents on Friday. Trading was closed
on Monday in observation of Memorial Day.
Cambodia's move, however, may have a limited effect on the long-term
world rice market, according to a U.N. rice expert, because the ban
had already been somewhat lifted.
Cambodia has limited milling facilities, said Concepcion Calpe at the
U.N.'s Food and Agriculture Organization in Rome. The country has to
export rice to two neighboring countries, Thailand and Vietnam, to get
milled. Cambodian rice will then be re-exported from these two
countries.
"They had lifted bans in a number of neighboring provinces along the
boarder," said Calpe. Officially ending the ban will "make things a
little easier, but there won't be much difference because rice has
already flowing through the boarder."
Export restrictions
Rice futures have almost doubled this year, touching a record high of
$24.46 per 100 pounds in April, despite estimates that the world rice
production is to hit a record high in the next crop season. The
culprit is export restrictions among leading rice producers, analysts
said.
India, the third largest exporter of the grain, banned the export of
non-basmati rice in March. Commerce Secretary Gopal Pillai on Tuesday
said that the country won't follow Cambodia and ease curbs on export
restriction, Reuters reported.
India's "export restrictions spread to other suppliers and lead to
urgent efforts by rice importing countries to secure supplies -- at
any price -- in a thin global market," said Tom Slayton, an economist
at Center for Global Development, a Washington-based nongovernmental
organization, in a note.
Vietnam, the world's second-largest rice exporter, reportedly may lift
restrictions on rice exports in July. But the country lowered this
year's export target to between 3.5 million and 4 million tons from
last year's 4.5 million tons.
Other countries such as Argentina, Russia, Ukraine and Kazakhstan have
also placed additional taxes or restrictions on exports of grains,
rice and other products.
Export restrictions in some countries were driven by political
reasons, Slayton said. India is facing a parliamentary election in May
2009 and "the government does not want to face further criticism."
To secure grain supplies, consuming countries have been encouraging
imports by reducing or eliminating tariffs. Mexico on Sunday
eliminated import tariffs on staples including corn, rice and wheat,
according to Reuters.
Moming Zhou is a MarketWatch reporter, based in San Francisco.
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