Jasmine rice to debut on Afet

With its positive price outlook, jasmine rice is expected to attract investors when it becomes the latest commodity to be listed in agricultural-futures market later this month.

"When the white-rice price rises, that for jasmine rice also jumps. But when the price of white rice drops, the jasmine-rice price does not fall much," said Thai Rice Mills Association vice president Banjong Tangjitwatthanakun.

With its limited supply, the price of Thai jasmine, or hawm mali, rice is always strongly volatile, but the prospects for the price of the premium grade is very positive, thanks to strong demand, he said.

Hawm mali 100-per-cent grade-B rice will be listed on the Agricultural Futures Exchange of Thailand (Afet) on July 14 with the symbol "BHMR".

Executive vice president Nitus Patrayotin said the market chose this variety of jasmine rice because it was the most popular, accounting for half of all jasmine-rice exports.

The three commodities now listed on Afet are 5-per-cent white rice, ribbed smoked rubber sheet No 3 and tapioca chips.

Experts say despite recent falls in the white-rice price from its peak a few months ago, the market for jasmine rice remains positive.

"The market has expanded over the past two or three years, not in Asia, but rather in Africa. Some African countries have become wealthier from oil exports and switched from broken jasmine rice to good-quality jasmine rice," said Thai Rice Exporters Association president Chookiat Ophaswongse.

Thailand exported 9.5 million tonnes of rice last year, 41 per cent of which was white rice, 31 per cent jasmine rice, 22 per cent steamed rice and 6 per cent other varieties. Exports of jasmine rice rose to 1.86 million tonnes last year, up from 1.69 million tonnes in 2006 and 1.46 million tonnes in 2005.

Three of the top 10 importers of Thai jasmine rice are in Africa. Senegal was the biggest buyer last year, importing about 540,000 tonnes, followed by the United States and the Ivory Coast. Ghana was the sixth-largest importer.

However, the jasmine-rice price is expected to be very volatile later this year and next. Jasmine paddy is now between Bt16,000 and Bt17,000 per tonne, while polished jasmine rice runs Bt29 to Bt30 a kilogram.

Rice Packers Association treasurer Sumeth Laomoraphorn said the volatility would be from rising global prices for white rice and expectations of lower supply.

He believes some farmers may shift from growing jasmine rice to tapioca, which is now used for ethanol production and has seen a significant rise in price. That may reduce the supply of jasmine rice, he said.

Thailand is the only producer of jasmine rice, with the main growing areas in the Northeast, including Surin, Si Sa Ket, Ubon Ratchathani and Nakhon Ratchasima provinces.

Besides general investors, rice exporters and millers alike will benefit from hedging their risk on Afet. For example, millers can sell their rice on the futures market, while exporters can buy rice from Afet to hedge for price movements.

Afet's recently introduced "Both Options" for rice trading will also benefit market players, because it provides options for investors who do not want to deliver or take delivery of products physically.

Both options allows investors to settle their trading account with either a cash settlement or physical delivery.

However, those who are familiar with the derivatives market are also familiar with the term "high return and high risk".

Thai Rice Association president Supoj Wongjirattitikarn warned that potential investors must first scrutinise all relevant information.

"Otherwise, you may make a mistake, which could mean a big loss," he said.