India rice prices dip on rupee dive, fresh supply prospects weigh on Thai rates

By Sethuraman N R

BENGALURU (Reuters) - Rice export prices in top exporter India fell this week to the lowest in over a year due to a plunge in the rupee as demand remained subdued, while rates in Thailand fell on expectations of fresh supplies and weakness in the domestic currency.

Prices of India's 5 percent broken parboiled variety fell by $2 to $392-$396 per tonne, the lowest in more than a year, as the rupee slumped to a record low, allowing traders to cut prices.

The Indian rupee has declined about eight percent so far in 2018, increasing exporters' returns from overseas sales.

"Demand is still subdued even as prices have come down below $400," said an exporter based at Kakinada in the southern state of Andhra Pradesh.

India's exports to neighbouring Bangladesh fell sharply after Bangladesh imposed a 28 percent tax on rice imports to support its farmers after local production revived, dealers said.

India was the biggest supplier of rice to Bangladesh in 2017.

Bangladesh, which has emerged as a major rice importer since 2017 after floods damaged its crops, imported a record 3.9 million tonnes during July-May, data from the country's food ministry showed.

However, imports by Bangladesh were expected to slow owing to the imposition of the tax.

In second-biggest rice exporter Thailand, prices of the benchmark 5 percent broken rice dropped to $385-$395 per tonne free on board (FOB) Bangkok, levels not seen since November 2017, from $390-$400 last week.

The depreciation of the Thai baht resulted in weaker prices, while slow logistics due to the monsoon season remained a problem, traders in Bangkok said.

The baht has fallen about 3.4 percent so far this month, having hit the weakest in over 7 months on Thursday.

A weakening currency makes export from the country cheaper in dollar terms.

Prices will likely slip further as a new crop is expected to start arriving around end-June or early July until August, traders said.

Meanwhile, in Vietnam, prices of 5 percent broken rice remained unchanged for a second straight week at $450-$455 a tonne.

"Prices may ease in the coming weeks as the summer-autumn harvest is expected to begin from mid-July," a Ho Chi Minh City-based trader said.

"However, domestic prices won't likely fall significantly given that rice production cost for the summer-autumn crop this year is higher than last year's, mostly because of the weakening of the dong against the U.S. dollar."

According to a Finance Ministry statement seen by Reuters, the paddy production cost for this year's summer-autumn crop is projected at 4,059 dong per kilogram, up 4 percent from a year earlier.

(Reporting by Patpicha Tanakasempipat in Bangkok, Khanh Vu in Hanoi, Rajendra Jadhav in Mumbai and Ruma Paul in Dhaka; Editing by Bernard Orr)