Rice purchases by China, the largest producer, may soar fourfold in the coming year after a government policy to support farm incomes drove up domestic prices, the United Nations said.

Shipments may reach 2.3 million metric tonnes to 2.4 million tonnes, said Concepcion Calpe, a senior economist at the UN's Food AND Agriculture Organization. That compares with a prediction of 2 million tonnes last month and 600,000 tonnes in 2011, according to the FAO. While there's no shortage in China, processors increased imports to profit from the difference between domestic and overseas rates, said Bai Peipei, an analyst at Beijing Shennong Kexin Agribusiness Consulting Co.

Rising imports by China may bolster prices even as world inventories tracked by the FAO swell to a record, boosted by the biggest global crop ever. While rice, the staple for half the world, has risen 4.4 per cent in Chicago this year, it is 16 per cent below a three-year high in September 2011. Most purchases by China, which typically imports from Thailand, were of Vietnamese origin this year.

"The year 2012 marks a radical departure from China's normal pattern of purchases," Calpe wrote in an e-mail to Hiroyuki Konuma, the FAO's assistant secretary general and regional representative for Asia and Pacific. "Nobody knows the actual volume of rice held in stocks by China," according to the e-mail, which was forwarded to Bloomberg Tuesday.

The price of the Indica variety in Hubei, a Chinese province with a surplus of the grain, has gained 11 per cent to 3,900 yuan ($625) per tonne in the year to September, FAO data show. That compares with Vietnam's export rate of $451 a tonne for its 5 per cent broken rice, the most-expensive variety from that nation tracked by the FAO. That variety has fallen further to $446 a tonne in November, the data show. Thailand's five per cent broken white rice was at $598 a tonne, according to the data.

"The government continues to buy from farmers at high prices to support planting," said Bai, of Beijing Shennong, a researcher that advises companies including global trading houses and government agencies. "Some processors in southern China have chosen to import rice over using domestic production because it's much more profitable."

The minimum price the government pays farmers for the Indica paddy advanced 18 per cent to 120 yuan per 50kgbag, the FAO said in its report in November. While that boosted the nation's supplies, it also pushed up domestic prices, it said.

China has purchased 1.43 million tonnes from Vietnam in the first 10 months of 2012, taking its total imports from all suppliers to 2 million tonnes, Calpe said. The total is four times the 505,244 tonnes that China imported in the same 2011 period from suppliers including Pakistan, Laos, Myanmar and four other shippers, Chinese customs data tracked by the FAO showed.

The strong pace of purchases by China prompted the U.S. Department of Agriculture to raise its estimate for the nation's imports in 2013 by a third to 2 million tonnes in November, from 1.5 million tonnes a month earlier. "As in 2012, China is expected to be a net importer in 2013," the USDA Economic Research Service said in a Nov. 13 report. The USDA maintained its estimates on China in its latest update released yesterday.

World ending stocks are forecast to climb 6.6 per cent to a record 169.8 million tonnes in 2012-2013, after three consecutive record harvests outpacing demand, according to the FAO.

Rough rice for delivery in January was little changed at $15.525 per 100 pounds on the Chicago Board of Trade at 4:22 p.m. Singapore time. Futures reached $18.54 on Sept. 12, 2011.

Milled rice production in China will climb to a record 143 million tonnes in the year that began July 1, the USDA said yesterday, maintaining last month's estimate. Consumption will gain 3.2 per cent to a record 144 million tonnes, it said.

Vietnam's rice exports will advance to an all-time high of 7.5 million tonnes in 2012, while Thailand's shipments will slump 39 per cent to 6.5 million tonnes, according to the USDA.

Source: Bangkok Post