The rally in rice prices, which stalled on Monday as the Philippines revealed healthy stocks, may yet have further to go, boosted by a potential return to a stockpiling mentality.

World rice stocks, which the US Department of Agriculture said on Friday would end 2009-10 at 90.2m tonnes, are low by historical levels, standing at just over 60% of levels at the start of the decade, analysts at the influential Hightower Report said.

And this stocks figure does not five an accurate reflection of supplies, given a reviving tendency among countries to stockpile.

A wish to hold onto ammunition for fighting food price inflation is likely to prompt India's government to hold on to its inventories, pegged at 26.7m tonnes as of April 1, more than twice target levels.

Meanwhile, Vietnam has announced plans to triple its rice reserve to 1.5m tonnes, and it was "easy to see" how drought in the biggest rice growing area in China, responsible for 30% of global demand for the grain, could spread the "inventory building mentality".

'Far from ample' 

"World rice stocks are far from ample by historic standards," Hightower analyst Terry Roggensack said.

"This may start to generate a shift in attitudes in Asia back in the direction of inventory building."

Government stockpiling has been widely viewed as a major reason for the 2008 price spike, in which rough rice in Chicago topped $24 a hundredweight.

'Significant' rally ahead?

Technical signals were also in the crop's favour, with funds and speculators cutting to a small net short in their position on Chicago rice, compared with a net long of about 7,000 at last year's peak, so suggesting large potential scope for buying should sentiment recover.

Indeed, a rise in prices after March 31 data on US stocks suggested there was little appetite for further sales.

"While traders called the news bearish, there was a total lack of new selling," Mr Roggensack said.

"Turning higher on perceived bearish news could be a sign of a near-term low."

He added: "It will not take much in the way of positive fundamental news to see a more significant rally in the weeks ahead."

Philippines secures supplies

The comments came as rice prices fell back in Chicago following a rally which, at Friday's peak, had driven them up 10% since the start of April.

May rice stood 0.8% lower at $13.090 a hundredweight in late trade.

The decline followed an announcement by the Philippines, the world's biggest rice importer, that it had completed imports for 2010, with the next purchases designed to meet 2011 needs.

Imports for 2010 had hit a record 2.45m tonnes, swollen by storms last year blamed for destroying the equivalent of 1.3m tonnes of unhusked rice.