SINGAPORE: Ample global rice stocks and buyers' reluctance to wade into a market many see as overpriced will put the brakes on a rally that saw the staple at 1-1/2 year highs this week and raised concerns about food inflation in Asia.

Speculation over aggressive intervention by the new government in Thailand, the world's biggest exporter, has pushed the benchmark white rice to $615 a ton, the highest since December 2009, even though demand has remained thin with top importers largely covered.

The rally coincides with higher prices for other staples, reigniting worries about food inflation at a time when the global economic outlook is grim.

Asia is home to the world's top rice consumers and producers, as well as its two most populous nations India and China, which have declared war on inflation.

US wheat climbed this week to its highest level in nearly three months, a gain of 36 per cent from a July low and corn rose almost 25 per cent from the end of June to reach a 2-1/2 month high.

Rice prices are up more than 30 per cent since an April low, but traders said plentiful supply meant prices were unlikely to see a repeat of 2008, when the benchmark rose above $1,000 a ton and Vietnamese rice followed suit.

Thailand and fellow top exporter Vietnam are on track to produce bumper crops and India, the world's biggest rice producer after China, is expected to return to the market soon after the government in July eased an export ban in place since 2008.

“The market is reasonably well supplied and buyers are not rushing to cover as the price rise has been quite dramatic,” said Vijay Iyengar, managing director of Agrocorp International, a regional grains trader based in Singapore.

“I see limited upside for rice, and when the Indian situation gets resolved you will find additional material coming into the market.”

The first round of Indian exports one million tons has been blocked by a court after exporters complained about quota allocations, an issue the government is resolving.

Traders forecast Thai rice prices to be capped at around $700 a ton until the end of 2011, even as domestic market climbs towards $850 a ton after taking into account the government's paddy procurement price of 15,000 baht ($500) a ton and costs involved in processing, packaging and storage.

Vietnamese traders also said prices could advance by $20-$30 a ton but they will not reach the April 2008 peak. Vietnam's 5-percent broken rice stood this week at $550-$565 a ton, up around 18 per cent from a year ago.

No fresh demand

The world's top buyers in Asia, the Middle East and Africa are expected to hold back as the price of Thai white rice jumped more than 10 per cent in August.

“Demand will start rationing as we have seen in 2008,” said one Singapore-based trader, who declined to be identified in line with his company policy.—Reuters