Brazil rice sector urges govt to end export ban

SAO PAULO/PORTO ALEGRE (Reuters) - The Brazilian government should lift its rice export restrictions before it sets a bad precedent and darkens the entire investment climate for the agricultural sector, producers and exporters said on Thursday.

Brazil's massive farm sector has been a stalwart performer in the economy for nearly the past decade. Farm sector exports alone boast a net trade surplus that is roughly equal to Brazil's total trade surplus.

But the government announced on Wednesday night that it would temporarily ban rice exports from government stockpiles to safeguard domestic supply and contain any pressure on food prices.

Brazil is not the first to attempt to apply such methods to manage food inflation.

Argentina has been shutting down many of its food export industries to contain local prices over the past months. India and Vietnam, the world's second and third largest rice exporters in 2007, have also imposed export restrictions, as world prices skyrocket on tight supplies.

Historically such attempts have failed miserably.

Brazilian Agriculture Minister Reinhold Stephanes plans to meet with rice producers in an attempt to strike a deal to limit exports of the grain, but analysts say it is unlikely to achieve much.

"The (private sector) ban won't happen. It would be a war," the commercial director of Rio Grande do Sul state's Rice Institute (Irga), Rubens Silveira, said.

Brazil should harvest an 11.9 million ton rice crop, up from 11.3 million last season. Harvesting is 80 percent completed.

Public stocks are estimated at 1.6 million tons, from which the government periodically holds public tenders to stabilize domestic prices.

With international prices at record levels, local producers are eager to export. Silveira said Rio Grande do Sul, Brazil's No.1 rice grower, should export about 10 percent of its crop at current prices, which will help support domestic prices and provide incentives to producers to invest in improving output.

He discarded any domestic market shortages, as did former agriculture minister Roberto Rodrigues, who also criticized the government's decision.

"In thesis, all intervention of this nature distorts the market and hurts producers," said Rodrigues at a seminar in Sao Paulo.

Sergio Mendes, general director of the National Grain Exporters Association, said he was concerned that the move by the government could take place in other productive areas of the farm sector, which would sour investment sentiment.

Stephanes said in an interview on the local Globo News TV network that the ministry would also be monitoring the flow of corn out of the country. Brazil exported a record of more than 11 million tons of corn over the last 12 months.

"If our producer attends to international demand, we will have domestic problems ahead, and we will have to import rice. So we have to have a type of gentlemanly agreement," he said.

(Reporting by Camila Moreira, Roberto Samora, Aluisio Alves, Reese Ewing and Sinara Sandri in Porto Alegre; Editing by Marguerita Choy)