Rice May Climb 100 Percent by 2008

A record crop this year in a market anticipating rising production costs will do little to slow the rally for the staple of 3 billion people. As China, the No. 1 consumer, and Vietnam, among the biggest exporters, continue to plow under their paddies, rice will double within two years to almost $20 per 100 pounds from $9.90 now, according to Stephan Wrobel, chief executive officer at Diapason Commodities Management SA in Lausanne, Switzerland, which oversees $5.5 billion.

Mother Earth Investments, a Liechtenstein-based fund whose rice holding rose a percentage point to 4 percent during the past 12 months, gained 23 percent this year, almost triple the Goldman Sachs Commodity Index. ''Fields in China are now being turned into land to build'' apartments, factories and roads, said Roland Jansen, the Mother Earth manager.

The prospect of reduced production threatens to spur inflation in rice-importing nations from the Philippines to Nigeria, while driving up costs for manufacturers including Anheuser-Busch Cos., the U.S.'s biggest buyer of the grain, and cereal makers such as Kellogg Co. Rice inventories worldwide are already near a 26-year low and will drop further, according to the U.S. Department of Agriculture in Washington.

The quantity of unsold rice this year will be barely half the level of 2000's surplus, reducing the buffer against a crop failure, the department forecasts. Fertilizer and irrigation costs are rising with energy prices, and farmers are turning to cheaper-to-grow grains, fruits and vegetables.

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Source - Bloomberg

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