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CCTV Script 10/05/16

– This is the script of CNBC's news report for China's CCTV on May 10, Tuesday.

Welcome to CNBC Business Daily, I'm Qian Chen.

The global supply of rice is projected to shrink significantly due to the effects of El Niño, and Asia is taking the punch.

Take a look at these three countries -- India, Thailand and Vietnam. They account for more than 60 percent of the global rice trade.

But high heat and droughts are resulting in these top exporters to ship just 19 million tons of the grain during 2016 compared with 40-plus million tons in 2013.

This situation is reminding many observers of a similar El Niño-related crisis in 2008 when reactionary policies were implemented, prices soared, and people rioted in different parts of the world.

While the cost of rice is still under $400 a ton, compared to the $1,000 a ton it reached 8 years ago, prices will likely keep rising.

Thus, some of the major producers and importers are already considering building up their own surpluses to offset worsening conditions.

"As of now, we haven't seen a large price reaction to hot and dry weather, because we have had such significant surplus stocks in India and Thailand," said James Feel, an economist at the International Grains Council. "But that can't last forever."Prices have not yet been affected due to a surplus, but could soon."

Experts say we might see a 10%-15% jump in rice prices soon.

How bad the impact of the drought will be on agricultural output - not just of rice in Vietnam and Thailand but of commodities such as coffee in Vietnam - is still uncertain.

Some 167,000ha of rice and tens of thousands of hectares of coffee have been affected by drought and salinity, with the Central Highlands - home to many of Vietnam's ethnic minorities - being the worst hit.

Coffee output in Vietnam, the world's biggest producer of robusta beans, is forecast to drop to the lowest in four years next season amid the worst drought in three decades.

Tighter supply from Vietnam could see global coffee prices going up.

Global supply is shrinking as El Nino weather conditions cause crop losses in Southeast Asia and South America. Robusta, used mainly in instant coffee, rose 7.3% in March, and another 9.2% in April.

In Thailand, Mr Vichai Sriprasert, the president and chief executive of exporter Riceland International, estimates that the second rice crop could suffer a 30 per cent fall in output.

In Vietnam, coffee exports could shrink by 25 per cent this year to one million tonnes.

This might not be ending soon...

"Have a crop failure for one year, be poor for three years," -- a saying in Vietnam clearly indicates how the country depends on its agricultural exports.

Now, the key is -- when the raining season can officially kick off.

CNBC's Qian Chen, reporting from Singapore.

Follow us on Twitter: @CNBCWorld

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