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SINGAPORE: A rebound in rice supply from India and Pakistan this year will calm fears over food inflation faced by poor nations as cheaper grain from the South Asian neighbours corners a third of the global market.

South Asia's ample grain stocks will help it undercut key traditional suppliers, as a populist scheme in Thailand prices its grain out of competition and high export floor prices in Vietnam deter some buyers.

India is likely to emerge as the world's second largest rice exporter in 2012, selling around 7 million tonnes, while Pakistan's shipments are expected to bounce back to about 4 million tonnes amid the high prices of rival Thailand.

“Indian rice supplies will act as a price stabilisation factor against high global food inflation,” said Tajinder Narang, advisor at a New Delhi-based trading company Emmsons International.

Global food prices rose in March for a third straight month with more hikes to come, the UN's Food and Agriculture Organisation (FAO) said last week, with higher prices of oilseeds and grains contributing to the rise.

The FAO index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 215.9 points in March, up from 215.4 points in February.

Although the index level is below its Feb. 2011 peak of 237.9, it still exceeds the level during the 2007-08 food price crises that triggered global alarm.

After benchmark Thai white rice prices climbed to a record above $1,050 a tonne in May 2008, several nations, including India, put a ban on exports.

That left buyers scrambling for supplies, unleashing concerns over food inflation and the threat of unrest in poor nations in Africa and Asia. But high stock levels in India and Pakistan could help avert a replay this year.

Rice Prices Seen Steady

Competition from India and Pakistan has kept a lid on rice prices this year.

The Thai benchmark 100 per cent B grade white rice dropped in February to its lowest since June, with prices having slid more than 5 percent this year, while Vietnam's 25 per cent broken rice has lost almost 8 percent in 2012 to trade at $415 a tonne.

Vietnam is seen snatching the title of world's biggest rice exporter from Thailand this year, having set itself the aim of matching last year's record shipments of 7.2 million tonnes, aided by strong demand and a positive outlook for domestic production.

Still, Vietnam faces stiff competition from India in the African market as Vietnamese rice prices have been higher, partly because the country's food association maintains a price floor mechanism.

Indian 5 percent broken rice is quoted at around $440 a tonne, free on board, compared with $480 in Pakistan, $490 in Vietnam and $540 in Thailand.

Global rice prices are likely to remain steady in coming months despite additional demand from China, the world's top consumer and producer of the staple, traders said.

“There could be slight upward movement from time to time when there is additional demand, just as China's purchases of Vietnamese and Pakistani rice lifted prices,” said one Singapore-based executive with an international trading company.

“But the market will move down soon afterwards as supplies are more than enough.” Vietnam's exports to neighbouring China could climb six-fold to around 2 million tonnes this year as the world's most populous nation steps up imports to cap domestic rice prices.

India is poised to meet huge overseas demand with its silos overflowing after several years of bumper harvests. On March 1, rice stockpiles in government warehouses stood at 33.2 million tonnes, just under three times a target of 11.8 million.

 Indian Monsoon: Key to Supplies

But the risk of poor June-September monsoon rains could force India to curb overseas shipments, denting global supplies, since the monsoons typically make or break the nation's summer-planted crops, traders said.

“I think Indian monsoons are the most critical thing for global rice business going forward,” the Singapore trader said.

“India will be in the market until July 2013 if the monsoons are good.”

India's exports this year are expected to jump 50 per cent from last year's shipments of 4.6 million tonnes, according to data from the US Department of Agriculture. India had exported 2.2 million tonnes in 2010.

Neighbouring Pakistan, which is expected to ship 3.8 million to 4.0 million tonnes in 2012, or an increase of at least 19 percent from 3.2 million last year, is cracking new markets with the sale of 200,000 tonnes to China and unconfirmed exports to the Philippines through unofficial channels.

“When we got a setback from Iran, our exporters looked elsewhere and that has led to diversification,” said Javed Agha, chairman of the Rice Exporters Association of Pakistan, referring to the impact of tightening Western sanctions over Iran’s nuclear programme.

In Thailand, prices have spiked due to a government intervention scheme due to run until the end of June, that is paying farmers 15,000 baht for a tonne of paddy, lifting Thai rice export prices to $500-$560 per tonne.

The Thai government’s rice stockpile has already swelled to a near record of 6.8 million tonnes, leading traders to wonder how low prices will fall when the government decides to offload stocks on the market.

As South Asian countries boost shipments, helpless Thai exporters are throwing up their hands.

“Thai exports will be adversely affected as we can’t compete at higher prices,” said Chookiat Ophaswongse of the Thai Rice Exporters Association.