WORLD RICE SITUATION

SITUATION MONDIALE DU RIZ

SITUACIÓN MUNDIAL DEL ARROZ

World rice situation and outlook 2001-02 ¹

C. Calpe

Senior Commodity Specialist, FAO Commodities and Trade Division

SITUATION IN 2001

Global production and stocks fall in 2001

Global paddy output in the 2001 season was 591.1 million tonnes (395.3 million tonnes in milled equivalent), about 7 million tonnes less than in 2000 and 19 million tonnes below the all time high reached in 1999 (Table 1). The fall in 2001 reflected to a large extent a reversal of policies in China. Confronted with huge rice inventories and the need to prepare for an increase in cereal imports following the country's accession to the World Trade Organization (WTO), most producing provinces had started reducing the level of support or "protective" rice prices in 1999 and even abolished them in 2000 in the case of early rice. These changes, together with summer drought problems, caused China's paddy production to slide to 177 million tonnes in 2001, the lowest level since 1993. In the rest of Asia, paddy output fell in Indonesia, the third largest producer, reflecting a shift in plantings and recurring flooding problems. Crop diversification and storms negatively affected also the summer/autumn crop in Viet Nam, resulting in an overall contraction in output, while lingering dry spells reduced considerably the availability of irrigation water in Pakistan, causing a 21 percent drop in production. Drought continued to afflict the Islamic Republic of Iran, constraining plantings and hindering a recovery. Production also fell in Japan, Sri Lanka and Thailand. On the other hand, relatively good monsoon rains boosted production in India to 135 million tonnes, the highest performance in history. Favourable growing conditions combined with government support to the sector also sustained an increase in Bangladesh, Myanmar, the Philippines and the Republic of Korea.

FIGURE 1
Global rice production and consumption

The 2001 paddy season was relatively good in Africa, with the exception of Egypt where reduced water supply constrained plantings. In western Africa, favourable growing conditions and dynamic domestic demand sustained an increase in output in all major producing countries, including Côte d'Ivoire, Mali and Nigeria. Based on current estimates, the increase in the sub region relied almost equally on an expansion in the area and in yields, the latter exceeding 1.7 tonnes/ha for the first time since the early 1990s. In the rest of Africa, output is estimated to have recovered fully in Madagascar, where it had been badly affected by floods in 2000. Increases were also recorded in Mozambique and the United Republic of Tanzania. By contrast, the season ended with a contraction in Latin America and the Caribbean, with output falling in Argentina, Brazil and Colombia. In the rest of the world, a record crop was reaped by the United States and Australia, while a shift towards alternative crops depressed output in the Russian Federation.

Global rice inventories at the close of the 2001/02 marketing seasons were cut by 14 million tonnes to 151 million tonnes, as consumption outpaced production. However, the bulk of the decline was concentrated in China, which holds more than 60 percent of world stocks. The drawdown in that country was consistent with the government objective of reducing the associated financial costs and of releasing storage space ahead of the opening of preferential grain import quotas. Rice holdings also diminished in Indonesia and Japan. By contrast, the size of stocks rose in India and the United States.

FIGURE 2
World rice closing stocks

Only a modest increase in trade in 2001

International trade in rice rose slightly in 2001, reaching 23.4 million tonnes, up from 22.8 million tonnes in the previous year. The increase was sustained by dynamic demand by countries in Africa, which imported more than 7 million tonnes overall. Shipments into the region were spurred by low international prices compared with locally produced supplies and growing consumer preference for rice. They were facilitated by the relatively open import policies that have been implemented since the liberalization of the sector in the early and mid-1990s. Particularly large volumes were delivered to Nigeria and South Africa, mainly in the form of parboiled rice, and to Côte d'Ivoire and Senegal, mostly as high-percentage broken rice. Madagascar and Mozambique also stepped up their purchases, especially during the first months of the year, when domestic supplies from the poor 2000 crop started to thin.

However, Asia remained the principal destination of rice imports, accounting for about 50 percent of the total. During 2001, imports into the region faltered somewhat, as purchases by a number of major importers diminished. This was especially the case in Indonesia, which has been the largest world rice market in recent years. Shipments into the country declined by 600 000 tonnes to 1.4 million tonnes in 2001, a reflection of the large inventories built up during the previous two rice seasons. Imports by Bangladesh, another traditional importer, also declined in response to large domestic supplies following a bumper 2001 crop and the imposition of a supplementary 10 percent import duty in August. On the other hand, purchases by the Philippines rose, stimulated by a growing domestic demand. Larger deliveries were also made to the Democratic Republic of Korea, mainly in the form of food aid, in response to the severe 2001 production shortfall, and to Saudi Arabia. Rice flows into the other regions were not subject to major changes, with slightly smaller imports going into Brazil, and somewhat larger ones to Mexico.

The relative sluggishness of import demand in 2001, combined with large rice supplies in exporting countries led to an intensification of competition for markets. For instance, India implemented an aggressive pricing policy at the end of the year, in an effort to ease the pressure caused by burgeoning public stocks. Sales from government inventories were allowed for export at the same very low prices as applied to domestic sales to customers below the poverty line. As a result, sales of non-basmati rice picked up in the last few months of 2001, supporting a small increase in the total volume of trade. Exporters in Egypt also benefited from government subsidies until September and, thereafter, from a weakening of the currency, which boosted their competitiveness. As a result, shipments from the country rose by more than 30 percent. Despite a poor production performance, Pakistan reported large deliveries of non-basmati rice, especially over the first six months of the year, when domestic availability constraints were lower. Eventually, with 2.3 million tonnes exported, the country achieved its best performance ever. Record sales of 7.5 million tonnes were also made by Thailand, which surpassed the original government target of 7 million tonnes. The country's shipments picked up during the last quarter, assisted by a weakening of the local currency and reduced competition from Viet Nam. Exports from the latter, at 3.5 million tonnes, were only slightly above the level of 2000, but lower than the 4 million tonne objective originally set by the government. Failure to meet the target was largely a result of the introduction of export restrictions in November, in the wake of severe flooding problems that constrained supply from the ten-month crop.

Shipments out of Australia were substantially higher, consistent with the record crop gathered by the country in 2001. This was not the case in Argentina, whose sales were hampered by high domestic prices and a strong currency. China cut its shipments by 1 million tonnes, in line with the fall in production. The decline also reflected the poor quality of the rice available in stocks. However, the country maintained its sales of high-quality rice to the principal markets in Iraq, Japan and the Republic of Korea and of broken rice to Côte d'Ivoire. Shipments from the United States also fell.

International rice prices weakened further in 2001

Notwithstanding the contraction in global production in 2000 and again in 2001, world rice supplies remained ample in 2001 as rice was released from the large stocks that had been built up by major producers during bumper crop years between 1996 and 1999. Ample availabilities combined with sluggish import demand exacerbated competition among exporters, often inducing governments to intervene actively to promote national rice sales in bilateral deals.

As a result, international prices remained under downward pressure during most of 2001 and the FAO Rice Price Index (1982-84 = 100) fell to 90, or 8 points less than in 2000. Compared with 1998 and 1999, prices were 30 percent and 21 percent lower, respectively. Although the tendency affected all rice varieties and qualities, the decline was most pronounced for the higher-quality grains. For instance, Thai 100%B rice was quoted at US$177/tonne in 2001, down from US$207/tonne a year earlier, despite recurring public intervention purchases carried out during the course of the year. In the second half of the year, production shortfalls in Pakistan and Viet Nam were not sufficient to give a boost to international prices, especially as cheap supplies were released for export from India's public stocks.

FIGURE 3
Rice exports by the major exporters, 2000-01

FIGURE 4
FAO Export Price Index for rice

OUTLOOK FOR 2002

Global paddy production likely to decline further in 2002

World paddy output in 2002 will largely depend on the pattern of the monsoon rains in Asia, still to begin at the time of writing. However, paddy crops are at an advanced stage of development in the southern hemisphere and in countries along the equatorial belt. Based on information regarding the stage of those crops and the relevant countries' information on planting intentions, FAO's preliminary forecast for the 2002 paddy season has been set at 588 million tonnes, or 3 million tonnes less than in 2001. The outlook pre-empts the possible negative impact of a new El Niño event, which, in recent months has given signs of reappearing. As a result, several countries in Asia and Latin America and the Caribbean are compounding a recurrence of this weather anomaly in their production forecasts, although the uncertainty surrounding the likely impact of such a recurrence is still high. While some unusual dryness currently prevailing in parts of Indonesia, Malaysia, Thailand and Viet Nam has been linked to El Niño, concern is mostly focused on the influence this weather phenomenon would have on the rainfall pattern during the second half of the year, when the main, rainfed, paddy crops that will constitute the bulk of world production are grown in the northern hemisphere.

In the southern hemisphere, the first official figures for paddy production in Indonesia point to a contraction to 48.7 million tonnes, 1 million tonnes below the 2001 level, when the crop was affected by recurrent flood problems, and one of the lowest performances of the 1990s. In Malaysia, the harvest of the main paddy crop is nearing completion. Growing conditions have been less than ideal, which may lead to a decline in output from the peak achieved last season. In Sri Lanka, where harvesting of the main Maha paddy crop is under way, production could also be depressed by the low prices that have prevailed over the last season. In South America, high prices at planting times were reported to have resulted in larger plantings in Brazil. As a result, output there is forecast to rise by about 1 million tonnes to 11.4 million tonnes, recovering fully from last season's shortfall. By contrast, official forecasts point to a 16 percent decline in plantings in Argentina, which could bring output down to 700 000 tonnes. Similarly, in Australia, shortages of irrigation water are estimated to have caused a 19 percent fall. As a result, production is forecast to decline from a record 1.8 million tonnes in 2001 to 1.2 million tonnes this season.

In the northern hemisphere, planting of the early rice season is progressing under satisfactory weather conditions in China. However, FAO forecasts a further retrenchment of paddy production in the country this season. Although domestic prices recovered in 2001, they have remained low, which could result in continued diversification towards alternative crops. In addition, large rice supplies are expected to be released from public stocks again this year, which, together with the expected growth in imports, could limit the scope of the price recovery. Little is known about the planting intentions in India. The country recently approved a major reform of domestic grain-marketing policies, which had previously restricted interprovincial movements and storage of rice under the Essential Commodity Act. However, the impact on production is difficult to assess at this stage.

Expansion in trade expected in 2002

The volume and pattern of the rice trade in 2002 will be influenced by the outcome of the 2001 paddy season in the northern hemisphere and, to a smaller extent, by the 2002 crops in the southern hemisphere, which are harvested in the first months of the year.

The international rice trade in 2002 is currently forecast to rise to 24.8 million tonnes, 6 percent higher than in 2001. Much of the expected growth would reflect a surge in imports by mainland China and Indonesia, to 1 million tonnes and 3 million tonnes, respectively. In the first case, the increase would be associated with the opening of preferential import quotas following China's accession to the WTO, although not to the full extent of the quota opening of almost 4 million tonnes. Taiwan Province of China is also expected to open up its market to imports and buy the full 145 000 tonnes committed under the WTO minimum access quota. Rice shipments to Indonesia are expected to soar, mainly reflecting the disappointing performance of the 2001 rice season. Domestic prices have reportedly been rising, obliging Bulog, the State Food Agency, to release supplies onto the market. By contrast, smaller imports are likely to be made by Bangladesh, Malaysia and the Philippines, which all harvested good crops in 2001. Moreover, the Government of Malaysia has announced a new set of measures to prevent rice from entering the country illegally. Shipments to Sri Lanka may also fall compared with those of last year, if a recently announced six-month ban on rice imports is implemented.

FIGURE 5
Rice wholesale prices in China

Rice shipments to Africa could fall from the exceptionally high level of 7.1 million tonnes last year to 6.3 million tonnes in 2002, with much of the decline arising from smaller shipments to Côte d'Ivoire, Madagascar, Nigeria and Senegal. While the rise of imports to the region in 2001 mainly reflected strong domestic demand and low world rice prices, the fall forecast for the current year is mainly attributable to relatively large opening stocks and the possibility of a strengthening of international prices. It should also reflect the rise in import duties in Nigeria, from 50 percent to 75 percent and again to 100 percent over the first three months of 2002. Given the important role of the region in the world rice market, it is noteworthy that changes in its import policies could have a significant impact on international prices, especially of parboiled and broken rices, which are the preferred types imported into the region.

In Latin America and the Caribbean, shipments to Nicaragua have officially been forecast to double to some 60 000 tonnes, consistent with the fall in production expected this year. By contrast, Colombia is expected to cut shipments to some 15 000 tonnes, down from an estimated 100 000 tonnes in 2001. The revision follows the issuance by the government, in January, of a resolution that states the level to be imported during the year, all of which should be sourced in Andean Pact countries. Larger purchases by Cuba and Mexico are expected, while those by Brazil could fall, given the current expectations of increased output in 2002.

Among developed countries, the Russian Federation announced in October 2001 that it would increase tariffs on rice imports from 5 to 10 percent, in an attempt to limit these to some 40 percent of domestic consumption, or about 350 000 tonnes. The introduction of an import ceiling for an equivalent amount is also likely. Shipments to Japan are forecast to remain largely unchanged, while those to the European Community are expected to hover around 600 000 tonnes, as in previous years.

FIGURE 6
Differential between Thai and United States rice prices

The surge in world rice exports in 2002 is expected to be met through increased deliveries by all major exporters, including mainland China, Egypt, India, Thailand, the United States and Viet Nam. However, shipments from Cambodia, Pakistan and Australia could be constrained by limited domestic availabilities.

Rice exports by mainland China could reach 2 million tonnes in 2002, despite the retrenchment of production in 2001, since the country is still disposing of large supplies in storage. It is noteworthy that under its commitments to the WTO, China has agreed to ban the use of export subsidies on all agricultural exports. Official forecasts for rice deliveries by Egypt stand at 850 000 tonnes in 2002, 100 000 tonnes more than in 2001. The country's rice export policy in 2002 has not yet been officially announced. Under the subsidy programme launched between October 2000 and September 2001, subsidies of US$25/tonne were granted on exports of medium grain rice and US$50/tonne on long grain rice. Exports from Thailand are expected to rise to a new high of 7.6 million tonnes in 2002. The official forecast for the United States also points to some increase. In this connection, in the preliminary allocations of rice concessional sales in fiscal year 2002, the country has earmarked 166.1 thousand tonnes under the Public Law (PL) 480 Programme, which allows especially favourable credit conditions to eligible countries, and 1.6 thousand tonnes under the Food for Progress Programme. Indonesia and Uzbekistan were designated as the main beneficiaries of those concessional sales. Although the official export target for Viet Nam has been reduced from 4 million tonnes to 3.8 million tonnes, this would still imply an increase from last year's performance. Export activities in the country have slowed down from December 2001 until March 2002, when harvest of the tenth month began, following the introduction of export restrictions. The measure was adopted to prevent domestic shortages from arising, in view of the limited supplies resulting from the summer/autumn crop and low rice inventories. Strong availability in India arising from the record 2001 crop and large opening stocks is likely to induce the government to maintain its favourable export policy, which is based on very low sale prices from public stocks. As a result, the country is likely to achieve its best export performance since 1999. Myanmar is also expected to deliver more rice to international markets this year. By contrast, the decline in 2001 production is expected to result in smaller rice shipments from Australia, Pakistan and traditional suppliers in South America.

International rice prices have shown signs of a recovery in the first three months of 2002, with the FAO price index averaging 91 in January and February, two to three points above the monthly levels that have prevailed since August 2001. However, prices softened somewhat in March, when Viet Nam re-entered the market and the index fell to 90. In the first three months of 2002, Thai prices tended to strengthen, sustained by government procurement purchases. By contrast, large domestic supplies from the excellent 2001 crop continued to exert a strong downward pressure on rice quotations in the United States. As a result, most prices of rices of United States origin fell in the first three months of the year. The divergence of trends in Thailand and the United States significantly narrowed the price differential traditionally existing between similar rices from the two origins. For instance, the price premium enjoyed by the United States on the high-quality long grain, which had averaged US$86/tonne in 2001, fell to US$6/tonne in March 2002. More generally, rice from Thailand and Viet Nam were priced higher in March 2002 than one year earlier, while rice from India, Pakistan and the United States tended to be valued less.

The price outlook for the rest of the year remains uncertain. Fears of a strong El Niño recurrence are rendering some exporters hesitant to release supplies at the current price levels. At the same time, with stocks in public stores at a record high, India is expected to maintain its low export price policy, which is having a strong bearish effect on world prices. On the other hand, quotations could be lifted by the opening of China's market to imports and by a surge of Indonesia's purchases above the currently expected 3 million tonnes. However, the most crucial factor influencing the market will be the development of the outlook of the main crops in the second half of the year, when the monsoon rains will arrive, and a possible resurgence of El Niño.

Production mondiale de riz: situation et perspectives 2001-2002

En 2001, la production mondiale de riz a baissé, tout particulièrement en Chine. Par conséquent, la consommation mondiale de riz a dépassé la production, entraînant un recours important aux stocks mondiaux. Le commerce international du riz a augmenté quelque peu en 2001 sous l'effet de l'accroissement des importations en Afrique, tandis que les livraisons vers l'Asie restaient stationnaires. Malgré le déclin de la production mondiale, les cours du riz ont reculé pendant une grande partie de l'année, par suite de la faiblesse de la demande d'importation et de l'abondance des disponibilités exportables. En outre, les stocks d'ouverture importants et la campagne record de 2001 en Inde ont poussé le gouvernement à mettre sur le marché du riz destiné à l'exportation à des prix très compétitifs, ce qui a accru la pression à la baisse sur les cours du riz. Les perspectives pour 2002 restent incertaines, d'autant plus qu'une nouvelle manifestation du phénomène climatique El Niño a été prévue. Des signes annonciateurs ont déjà été perçus en Amérique du Sud, en Asie et en Océanie, et l'on s'inquiète énormément de l'incidence d'El Niño au cours du second semestre qui correspond à la période la plus critique pour la production de paddy. Les manifestations de ce phénomène climatique pourraient donc avoir de fortes répercussions sur l'économie mondiale du riz en 2002. La poursuite de la politique d'exportation actuelle en Inde et l'ouverture de contingents d'importation préférentiels en Chine sont les autres facteurs importants qui pourraient influer sur les cours en 2002.

Situación y perspectivas mundiales del arroz 2001-2002

En 2001 la producción mundial de arroz descendió, concentrándose en China gran parte de este descenso. En consecuencia el consumo mundial del cereal fue superior a la producción, con el resultado de una reducción considerable de las existencias mundiales. El comercio internacional de arroz creció algo en 2001, estimulado por las mayores importaciones a África, mientras que los envíos a Asia se mantuvieron estables. Pese a la contracción de la producción mundial, los precios internacionales del arroz no sufrieron variaciones bruscas durante la mayor parte del año, a causa de la escasa demanda de importaciones y las disponibilidades exportables abundantes. Además, las abundantes existencias iniciales y la cosecha sin precedentes de 2001 en India indujeron al Gobierno de este país a proporcionar arroz para la exportación a precios sumamente competitivos, lo que comportó una ulterior presión a la baja sobre los precios del arroz. Las perspectivas para 2002 siguen siendo inciertas, sobre todo porque se ha pronosticado una nueva aparición de la anomalía meteorológica El Niño. Aunque ya se han observado señales del fenómeno en América del Sur, Asia y Oceanía, suscita gran preocupación su posible influencia en la segunda mitad del año, que es el período más crítico para la producción arrocera. Por consiguiente, las modalidades de este fenómeno climático podrían tener consecuencias importantes para la economía mundial del arroz en 2002. La continuación de la actual política de exportaciones en India y la apertura de cuotas de importaciones preferenciales en China son los otros factores importantes que podrían influir en los precios internacionales en 2002.

¹ The information contained in this article is as of March 2002.