Brazil seeks to buy 300,000 mt of white rice via June 6 tender

Brazil plans to buy up to 300,000 mt of milled rice from global origins via a June 6 tender, as it seeks to rebalance the domestic price of the staple in the aftermath of deadly floods.

In a rare and controversial intervention by the government into the rice sector, Brazil seeks to buy shelf-ready 5-kg bags of rice with a government seal printed on the pack and 4 real/kg selling price ($0.77).

The governmental food security agency Conab published the rules and specifications of the purchase of Type 1 rice, but sources said to S&P Global Commodity Insights some key details appeared to be missing.

While the purchase will keep food inflation in check, the rice industry has railed against the idea since first mooted. Farmers say they could face financial losses and plant less rice in the next crop if cheaper imports are encouraged while mills say the measures will also leave them vulnerable.

"This is the biggest madness our people have ever seen!" one miller and exporter told S&P Global Commodity Insights.

The source said the measure was unnecessary and that there would be no shortage in the domestic supply of rice. The purchases would likely sideline domestic millers and lead to an expensive bill for the taxpayer who would ultimately subsidize the price of rice.

Another said of Conab's announcement that "nobody liked it, and it wasn't well done ... however this will happen, no matter what, how or when."

Media reports say the measure was proposed by President Luiz Inacio Lula da Silva after observing a sharp rise in rice prices after floods hit the main rice growing state, Rio Grande do Sul, a month ago.

Ongoing rainfall meant the flood waters lingered for several weeks in places, delaying the clean-up operation but also leaving unanswered for longer the question of how much rice has been lost.

Farmers have not waited to find out. They quickly hiked price for paddy or rough rice, in turn driving up millers' offers far in excess of the levels at which Asian rice trades on the global export market.

The private sector was first to react, importing 120,000 mt of Thai white rice to cool the market and quieten talk of a shortage. But price increases or the expectation of them has now prompted the government to intervene.

An estimated 10-15% of the rice in Rio Grande do Sul was awaiting harvesting when the floods hit. That translates to about 7-10% of national annual output given it grows about two thirds of Brazil's rice. But only a portion of these plants were in affected areas. An unknown quantity of harvested rice in farmers' silos is also said to have been reached by the waters.

While exporters do not have figures to offer, those interviewed by S&P Global have mostly sought to play down talk of huge losses to the crop which has made it difficult to negotiate with farmers for paddy.

Since the beginning of the week, S&P Global Commodity Insights, which publishes daily price assessments of the major global rice markets, has observed a downward trend in offers but they remain uncompetitive internationally.