Situation and short-term outlook of the world rice market¹

S. Mbabaali

Commodity Specialist, Basic Foodstuffs Service, Commodities and Trade Division, FAO

THE RICE SITUATION IN 1997

Record paddy production estimated for 1997

Harvesting of the 1997 paddy crop is virtually complete in major rice-producing countries in the Northern Hemisphere and FAO's current estimate for world paddy rice production is a record 572 million tonnes, up by 2 million tonnes from the previous record in 1996. The increase is largely due to yield improvements in China (mainland) that led to an estimated record production for the second consecutive year.

Global rice trade volume declines in 1997

International rice trade in 1997 is estimated to have decreased to 18.4 million tonnes, 1.2 million tonnes below the volume traded in 1996 and 2.5 million tonnes less than the 1995 record level. The decline reflected a contraction in the volume purchased by some major importers, which held larger opening stocks following good harvests and large imports during the 1995 and 1996 seasons. Shipments to Indonesia, the leading importer in 1995 and 1996, fell to 1 million tonnes, down from 2.1 million tonnes in 1996 and 3.2 million tonnes in 1995. Imports by the Islamic Republic of Iran dropped by 100 000 tonnes to 1.2 million tonnes. Purchases by China (mainland) more than halved to 326 000 tonnes, under the combined effect of increased domestic production and limited international supplies in 1997 of the high-quality fragrant rice that the country normally imports. Rice purchases by Senegal, one of the major rice importers in Africa, are estimated to be 450 000 tonnes, down by about 100 000 tonnes from 1996. By contrast, imports by Brazil are estimated to have risen by 200 000 tonnes to 1.1 million tonnes, following a production shortfall of about 6 percent.

With regard to exports, the pace of shipments from Thailand picked up dramatically during December and the country's exports are now estimated to be about 5.3 million tonnes, only slightly higher than the 1996 figure, but up considerably from earlier expectations. Vietnamese exports for 1997 are estimated to be a record 3.5 million tonnes, up from 3.1 million tonnes in 1996, making Viet Nam the second largest rice exporter for the second consecutive year. In addition to higher production, competitive pricing of Vietnamese rice has been a key factor underpinning exports. By contrast, rice shipments from the United States fell to their lowest level - 2.3 million tonnes - in five years, reflecting both a drop in production in 1996 and an increase in domestic consumption in 1997.

FIRST 1998 RICE OUTLOOK

A slight fall in paddy production

It is still too early to make a definitive forecast of the 1998 production, as the monsoon in Asia is yet to begin. However, based on the planted area and growing conditions in countries in the Southern Hemisphere and along the equatorial belt, and drawing conclusions from planting intentions in some of the major producer countries in the Northern Hemisphere, FAO is tentatively forecasting the 1998 global paddy output to be 565 million tonnes, providing a timely and normal development of the Asian monsoon. At that level, output would be only 1 percent below the 1997 record.

A mixed outlook for paddy production in Asia - Southern Hemisphere

In the Southern Hemisphere and the equatorial belt of Asia, the 1998 paddy production season is advanced, although delayed seeding in some countries will lead to a late harvest.

In Indonesia, growing conditions are reported to be generally favourable for the late development of the main season crop. However, harvesting of this crop will be several weeks late and output could be reduced, as planting of this crop, which normally starts in October/November, was delayed by up to ten weeks owing to a lack of moisture (El Niño affected much of the traditional rainfed rice areas). According to the first official estimates, somewhat less than 48 million tonnes of paddy may be produced in 1998, which would be lower than the drought-reduced 49 million tonnes recorded last year. In Malaysia, harvesting of the main paddy crop is under way and output in 1998 is likely to be slightly down from the 1997 estimated production of 2.1 million tonnes owing to a reduction in cultivated area. In Sri Lanka, total output is anticipated to expand by 27 percent to 2.8 million tonnes. Harvesting of the maha crop, the main season crop, is under way and an increase in output is expected as growing conditions have been generally favourable. The yala season is expected to start early, since water reservoirs are full.

Figure 1: Indonesia: rice production and imports

In the Northern Hemisphere, China's 1998 paddy season has begun with the sowing of early rice. While heavy rains in the southern parts of the country have affected some of the crop, weather conditions at this time of the year are normally highly variable. Regarding Thailand's second rice crop, high prices have encouraged farmers to seed more land to rice despite the government's warning of a potential shortage of irrigation water. In fact, temperatures have been unseasonably high since February and, with low water reservoirs, concern about the potential impact on production is mounting. Harvesting of this crop begins in late April. In the Philippines, preliminary indications suggest a 13 percent drop in this year's secondary crop output to about 4.2 million tonnes, reflecting reduced area sown owing to a lack of adequate water for irrigation. Harvesting of the winter-spring crop is under way in some parts of southern Viet Nam, but the dry conditions that have prevailed over the last few weeks may cause some losses. Harvesting of the kharif (main) crop is complete in India. The rabi crop is in the heading stage and the growing conditions are reported to be favourable. In Bangladesh, harvesting of the boro crop is expected to begin in April. Output from that crop is badly needed to relieve market shortages following a reduced aman crop, which was affected by bad weather during the period from July to November. As a result, rice prices have been on the rise since December. While paddy production in the country increased by an annual average rate of about 4 percent between 1994 and 1996, sustained by increased input use which boosted yields, bad weather trimmed growth in 1997 to 1 percent. In Japan, sowing of the 1998 rice crop has started. For this season, however, the area planted is likely to decrease as the target area of the diversion programme is set at 963 000 ha, 176 000 ha more than last year, and support prices have been cut by 2.5 percent to 263 yen/kg.

Africa - planting intentions uncertain in North and West Africa,
1998 paddy season advanced in southern Africa

North Africa. In Egypt, field preparation for planting of the 1998 paddy crop is under way, but there is no clear indication as to how much area will be planted to rice, a decision that is usually dependent on the availability of irrigation water. The government is planning on reducing the rice area in the medium term. However, this would not necessarily affect total production, as the impact of smaller area could be compensated by the use of new varieties that could increase average yields by up to 40 percent. This effort aims at conserving irrigation water for use in the production of other crops.

West Africa. While land is now being prepared for the planting of the 1998 season rice crop, the full planting intentions of West African countries are not known. In Nigeria, there are reports of a serious shortage of some inputs, especially fertilizers. In Guinea, annual rice production is expected to be boosted in the medium term by more than 50 percent from a national average of 600 000 tonnes through a major expansion programme. Yields from the project area have been increased up to four times the national average of 1.5 tonnes/ha. The project is working with an increasing number of local farmers who are hoping to bolster their incomes by applying the new technology.

Southern Africa. Despite a late start of rains in Madagascar, which delayed the transplanting of rice in some areas, favourable rains were received in most parts of the island in December and January. The area planted to rice and other cereals may be somewhat reduced as a result of the delayed start of the season. While precipitation received in February will be beneficial to crops, the major threat to the 1998 crops to be harvested in March/April is the persistence of swarms of African migratory locust in several regions of the country. Locust movements are currently reported in the southern and southwestern parts of the country but also in western and central major rice- growing areas. Aerial and ground control operations are in progress, but there are reports of limited availability of insecticides. However, given the potential impact of locusts on crops, harvest prospects are uncertain and crop losses could be substantial. In Mozambique, paddy crops continue to benefit from favourable conditions in most parts of the country. Despite initial concerns over a possible El Niño-induced drought, rains started early in September in the southern areas, gradually reaching the central and northern major agricultural provinces. However, there were reports of a few localized cases of flooding, but harvesting is expected to start soon.

South America - El Niño-related floods continue to disrupt season

The 1998 paddy season in South America is well advanced and harvesting is under way in several countries, although the season has been plagued by El Niño-related weather problems. Paddy output in Argentina will not be as high as anticipated because of heavy rains attributed to the El Niño that have flooded an estimated 5 percent of the rice area and favoured the development of fungal and other diseases. Paddy production is now forecast to be 1.2 million tonnes, 100 000 tonnes less than that anticipated earlier. In Brazil, the region's largest rice producer, harvesting is under way in the central and southern parts of the country and total output is expected to increase marginally to about 9.9 million tonnes following an increase in the area planted. In Uruguay, the 1998 paddy crop is being gathered and output is expected to be slightly above last year's record of 1.03 million tonnes, also reflecting an expansion in the area. Venezuela, which has emerged as an exporter in recent years, is likely to maintain its output at about last year's level of close to 640 000 tonnes. In Peru floods affected the rice crops during the growing season and output is expected to fall below the 1.3 million tonnes harvested last year.

Developed countries - mixed production forecasts

In the United States, USDA's report on farmers' planting intentions indicates that about 1.3 million ha of rice will be planted in 1998, slightly up from the previous year. Production is tentatively forecast to be 8.4 million tonnes, an increase of 4 percent from the 1997 estimate. Sowing of the rice crop normally starts around March/April.

In the European Union (EU), planting of the new season rice crop has just begun. In Italy, the largest rice producer in the region, weather conditions are generally normal for planting and the area under rice in 1998 is not expected to be much different from the 234 000 ha planted in 1997. For 1998, the proposed intervention price for paddy in the EU is 315.90 ECUs/tonne, down from 333.45 ECUs/tonne the previous year.

In Australia, the 1998 paddy crop is reported to be maturing and early harvesting in March is expected in some areas with the bulk set to begin in April. However, as a result of significantly lower water allocations in New South Wales, where virtually all the rice is grown, area seeded to rice declined by 16 percent to about
140 000 ha. Such a reduction is anticipated to lead to a contraction of paddy production of 14 percent to 1.2 million tonnes this season. A few isolated cases were reported where crops had to be dried and baled for hay owing to insufficient irrigation water.

RICE TRADE EXPECTED TO RECOVER TO A RECORD LEVEL IN 1998

The forecast for world rice trade in 1998 is an all-time high of 21.6 million tonnes which, if realized, would be 600 000 tonnes above the previous record achieved in 1995. The forecast is mostly based on reports of unfavourable growing conditions in some major importing countries along the equatorial belt and in the Southern Hemisphere, which already had experienced delays in planting. These countries are likely to suffer from substantial reductions in the yields of their 1998 main-season crop. These developments, together with the production shortfalls already experienced in 1997, are likely to boost rice import demand substantially above that of the previous years.

Most of the year-to-year increase in trade should be accounted for by Indonesia whose imports are forecast to be some 3.5 million tonnes. A prolonged drought in 1997, associated with the El Niño weather phenomenon, reportedly affected over 400 000 ha of paddy fields, leading to a shortfall in the 1997 production and a corresponding increase in import requirements for 1998. Rice import purchases for the first two months of 1998 alone are estimated to be about 900 000 tonnes, surpassing the estimate for the whole of 1997, and imports for March are estimated to be 500 000 tonnes. Domestic prices have risen sharply in the wake of Indonesia's large currency devaluation. To curb price increases, the government has stepped up its campaign to discourage hoarding. Starting in April, the government was also reportedly planning to increase rice supplies to the domestic market at subsidized prices, most of which are expected to be imported. Brazil is anticipated to purchase 1.2 million tonnes in 1998, up 100 000 tonnes from the 1997 estimate, to meet growing domestic demand, as no appreciable production gains are expected in 1998. Imports by Bangladesh are also likely to be stepped up, as recent reports have indicated that output from the aman crop has been negatively affected by bad weather and supplies are currently tight. The government has exempted rice imports from the 2.5 percent import tax. Purchases by China (mainland) are not expected to be much different from the 1997 level. Although demand for high-quality rice exists in China, importers are reported to be reluctant to increase supplies of such rice to the domestic market, as a rise in the tariff is likely to reduce their profitability. Imports by the Philippines are anticipated to be about 1 million tonnes, some 10 percent higher than in 1997.

On the export side, Thailand, the leading rice exporter, is anticipated to export 5.6 million tonnes of rice in 1998 based on current estimations of export availabilities and expectations of higher import demand, especially from Asian countries. Shipments out of Thailand for the first two months of the year totalled over 1.2 million tonnes, significantly up from about 700 000 tonnes during the same time in 1997. In Viet Nam, it is estimated that existing commitments for export supplies up to May 1998 total about 2.5 million tonnes, almost double the amount that was shipped during the first five months of 1997. The fast pace of exports has prompted the government to impose a temporary freeze on new export sales. Viet Nam is forecast to ship a record 4 million tonnes in 1998. Exports from India are generally less price-competitive than those from Viet Nam and Pakistan. However, given the good 1997 rice season and favourable world prices, India's exports are forecast at 2 million tonnes, up from 1.6 million tonnes in 1997 but still less than half the record of 4.2 million tonnes shipped in 1995. Following a record production in 1997, exports by Pakistan, which like India sells both the premium-priced basmati and lower-quality rice, are forecast to establish a new record of 2 million tonnes. Shipments out of China (mainland) are also expected to increase to 1.7 million tonnes, the highest in four years, primarily owing to its record 1997 paddy output.

Figure 2: Export prices for rice

INTERNATIONAL RICE PRICES STRENGTHEN

International prices for rice from most origins have trended upwards during the first three months, as expectations for record import requirements in 1998 continue and concerns about sufficient export availabilities begin to surface. The FAO Export Price Index for Rice (1982-84 = 100) averaged 124 points in March, up from 123 points in February but still below the level reached in March of last year.

Following the steep decline of Thai rice prices in the second half of 1997, partly owing to the sharp devaluation of the baht in that period, prices recovered during the first three months of 1998. The rise was supported by strong import demand and the recent strengthening of the Thai baht against the US dollar. The price quotes for Thai 100B averaged US$308/tonne in March, an increase of US$4/tonne from the February average of US$304/tonne. Prices of fully broken rice (Thai A1 Super) also rose by US$4/tonne from their February average to US$194/tonne. Prices of Vietnamese rice experienced an even sharper boost than those for Thai rice as the government is attempting to slow down the pace of rice exports and has introduced a temporary freeze on new contract sales beyond May 1998. Export prices from Pakistan have also remained firm. By contrast, in the United States export prices for long grain rice continued to weaken reflecting lower import demand from the South and Central American countries, which are traditionally the United States' main customers, as they are harvesting or will soon start harvesting their own crops.

Lower ending-stocks projected for 1998

FAO's forecast for global rice stocks at the end of the marketing seasons in 1998 is about 54 million tonnes, 2.4 million tonnes lower than their opening levels. All of the expected decline should be concentrated in the developing countries, especially in Asia and South America, as a result of the 1997 production shortfalls and again poor 1998 main-season crops. Of the Asian countries, Indonesia is anticipated to take most of the brunt of the stock decline. Lower stocks are also expected in India owing to a projected increase in rice exports. By contrast, stocks in Japan are likely to increase to their highest level in the last ten years as a result of declining domestic consumption as well as rice imports under its Uruguay Round commitments.

Situation et perspectives à court terme du marché mondial du riz

On prévoit que le volume du commerce du riz augmentera de 3,2 millions de tonnes en 1998 atteignant un nouveau sommet de 21,6 millions de tonnes. A ce niveau, le volume du commerce dépassera le record précédent de 21 millions de tonnes établi en 1995. Pour la troisième fois depuis 1995, l'Indonésie sera le premier importateur mondial de riz en 1998, par suite de la sécheresse qui a diminué les récoltes en 1997. Les importations du Bangladesh, négligeables l'an dernier, devraient remonter en 1998 du fait de la mauvaise récolte Aman.

Les cours internationaux du riz de la plupart des origines se sont renforcés courant mars. Les perspectives concernant la production mondiale de paddy en 1998 restent incertaines pour l'instant, mais la FAO prévoit provisoirement une baisse de 7 millions de tonnes par rapport à la production record estimative de 572 millions de tonnes en 1997. Le résultat final dépendra en grande partie de la date d'arrivée et de l'évolution de la mousson asiatique qui n'a pas encore commencé. Dans les principaux pays producteurs de riz d'Amérique du Sud, le temps froid et humide entrave les récoltes, qui débutent à peine, ce qui pourrait avoir des effets négatifs sur les rendements et sur la qualité, sauf amélioration rapide des conditions météorologiques.

Situación y perspectivas a corto plazo del mercado mundial del arroz

Se pronostica que en 1998 el comercio de arroz aumentará en 3,2 millones de toneladas, alcanzando de nuevo un volumen excepcional de 21,6 millones de toneladas. En ese caso, el comercio superaría la cifra sin precedente de 21 millones de toneladas registrada en 1995. Por tercera vez desde 1995, Indonesia se dispone a ser el principal importador mundial de arroz en 1998 tras la sequía que redujo la cosecha de 1997. Se prevé que las importaciones de Bangladesh, que fueron insignificantes el año anterior, aumentarán de nuevo en 1998 debido a una cosecha decepcionante en la campaña Aman.

Los precios internacionales del arroz de casi todas las procedencias aumentaron durante el mes de marzo. Las perspectivas para la producción mundial de arroz de 1998 son muy inciertas por el momento, pero la FAO pronostica provisionalmente un descenso de 7 millones de toneladas con respecto a la producción sin precedente de 572 millones de toneladas estimadas en 1997. El resultado final dependerá en gran medida de que el monzón asiático, que no se ha iniciado todavía, llegue oportunamente y se desarrolle con normalidad. En los principales países productores de arroz de América del Sur, se indica que el tiempo húmedo y frío está dificultando la recolección, que acaba de comenzar, lo que tendrá posiblemente efectos perjudiciales para los rendimientos y la calidad si las condiciones meteorológicas no mejoran en breve.

¹ As of March 1998. Production and trade figures for 1997 are still preliminary estimates and could be subject to changes.