|No.2 December 2006|
|Global Market Analysis|
The strength that has dominated the rice international market since January persisted over the July to September period, as reflected in the FAO All Rice Price Index, which gained one point every month, passing from 108 in June to 111 in September. The Index in October did not show sign of weakening, at 111, despite the arrival on the market of new crop supplies, and gained further steam in November (first three weeks), when it rose to 113. The price strength dominated all the rice market segments, including the Indica low quality, Indica high quality and Japonica rice, with the exception of fragrant rice, which showed signs of weakening in October and November 2006.
Much of the continued firmness reflected generally tight supplies in exporting countries. In the United States, prices remained on the rise, peaking in October and November to levels not seen in many years, influenced by the USDA’s downward revision of the 2006 crop. This was in spite of the finding of unauthorized GM rice in commercial shipments which only triggered a short-lived price slump in the immediate aftermath of the news release, in mid-August. Viet Nam’s rice quotations also grew stronger, lifted by a robust demand and limited supplies, a trend evident since June. In India, after several months of a fairly stable situation, export prices rose in October following the government announcement of increases in the domestic procurement prices, with further gains recorded in November. On the other hand, the availability of freshly harvested supplies tended to depress somewhat prices in Egypt and Pakistan in September and October, after several weeks of relatively high quotations. Thai rice was also priced lower in August and September, after the government procurement, bearing on the 2005 second paddy crop, ended on 31 July. The announcement, by the interim Government, of less attractive purchase prices under the government procurement programme and a plan to release public stocks through bi-monthly tenders also influenced negatively export quotations in October and November. On the import side, demand by African countries subsided in September, but continued purchasing interest by countries in the Near East and the Philippines has provided renewed vigour to the market since then.
As many countries just harvested their main paddy crops, import demand may weaken somewhat in the coming months. However, this is unlikely to result in much lower world prices as exporters are also expected to have limited supply for sale. As a result, price declines, if any, are likely to be only temporary. This would be especially the case if the export ban announced by Viet Nam in November 2006 remains in effect until March 2007 when the winter/spring crop will be harvested and if the main paddy crop in India is confirmed to be substantially smaller than in 2005. Thus, international rice prices are likely to remain on the rise at least until March 2007, a tendency that could become particularly marked should there be confirmation of strengthening El Niño conditions.
More detailed information on the rice market is available in the FAO Rice Market Monitor which can be accessed at:: http://www.fao.org/es/ESCen/20953/21026/21631/highlight_23001en.html
Table 3. World rice market at a glance
The forecast for global paddy production in 2006 is subject to downward revision, which would reflect a bleaker outlook for crops in Asia where several countries have been affected by persistent drought problems, and in August, by monsoon floods. Based on the latest FAO forecasts, 2006 global paddy production might fall to 631 million tonnes, 5 million tonnes less than anticipated earlier and slightly down from 632 million tonnes in 2005. The worsening of the outlook was particularly severe in the case of India, although there is still much uncertainty as to what will be the final level of paddy output in the country.
Production in Asia is now forecast at 570 million tonnes, only half a million tonnes less than last season’s level, but well below earlier expectations. Adverse growing conditions, in the form of typhoons, floods, drought, diseases and insect attacks, severely undermined paddy production prospects in 2006. As a result, little overall growth is currently expected in the region. Several countries, however, may witness an increase, in particular Bangladesh, where heavy rainfall in August brought relief to the main crop, but also Cambodia, Indonesia, the Islamic Republic of Iran, Myanmar, the Philippines and Viet Nam. By contrast, major setbacks are expected to depress output below last season’s level in the Democratic Republic of Korea, India, Japan, Malaysia, Nepal, the Republic of Korea, Thailand and Viet Nam. In India, the 2006 monsoon season, which ended in September, has been erratic and several important rice producing states, such as Assam, Tamil Nadu and Uttar Pradesh received below normal precipitation, while rainfall was above average in Orissa. FAO is consequently anticipating production in the country to harvest 135 million tonnes, 1.5 million tonnes less than last season. Crops in China were also affected by droughts, floods and disease problems with the result that production is now forecast to rise only marginally compared with 2005.
In Africa, about 22 million tonnes are now expected to be gathered in 2006, around some 700 000 tonnes more than previously anticipated, and 1.3 million tonnes above output in 2005. Much of the increase would reflect the favourable growing conditions that have prevailed in most countries, higher prices and government renewed efforts to revitalize the sector. Growth would mainly be on account of Egypt, Madagascar, Malawi, Nigeria and the United Republic of Tanzania, while Chad, Cote d’Ivoire and Mauritania may experience a contraction.
The production outlook in Central America and the Caribbean continues to be positive, with little damage from hurricanes reported in 2006, although concerns are rising over a possible strengthening of El Niño/ENSO conditions in coming months. Much of the expected gain in paddy production in the region would be by sustained by recovery in Cuba and the Dominican Republic and a continued expansion in Mexico. However, output may fall in Costa Rica, Nicaragua and Panama.
Based on the latest estimates, production in South America is set to contract by 6.5 percent to an overall 22.5 million tonnes, influenced by a negative outcome in Brazil, the largest producer in the region, but also in Colombia, Ecuador and Peru. In the rest of the world, production in 2006 is estimated to have expanded in Australia and the Russian Federation, while it is foreseen to fall in the European Union and the United States.
Table 4. Brazil paddy production by region in 2006 (for Brazil: 2005/06 paddy season)
Source: CONAB, Second Planting Intention Survey, Nov. 2006
Although it is too early to predict global paddy production in 2007, prospects for those countries in the southern hemisphere where the first 2007 crops are at the planting stage, are rather downcast, with strong drought conditions prevailing in Australia and Indonesia .In addition, as the chances of an occurrence of a moderate El Niño/El Niña event have recently risen, other countries’ rice crops could also be affected.
The FAO outlook for trade in calendar 2007 points to an expansion of only one percent to 28.9 million tonnes. However, trade prospects are still highly tentative at this stage as they are largely derived from production forecasts in 2006, many of which could still be subject to major revisions. The expected lack of substantial trade growth in 2007 would mainly reflect a relatively tight situation in exporting countries, which may push rice quotations further up in the course of 2007, thereby constraining the actual level of imports.
Global imports could recover somewhat in 2007, sustained by larger shipments to countries in Africa and Latin America and the Caribbean. By contrast, Asian countries are foreseen to import less, in particular Bangladesh, the Islamic Republic of Iran and the Philippines, which are all expected to harvest larger crops in 2006. In the case of the Islamic Republic of Iran, the drop could be accentuated by the imposition of higher tariffs on private sector rice imports, channelled through cooperatives at the border with Pakistan, which were reported to have been raised from 4 to 70 percent. Purchases by the Republic of Korea are also anticipated to decline in 2007 from the abnormally large purchases that the country had to make over 2006 to fulfil its minimum market access import obligations for 2005 and 2006. Under the agreement it clinched to extend the World Trade Organization (WTO) rice import waiver, the Republic of Korea should let some 266 000 tonnes of rice enter its territory in 2007 subject to a 5 percent import duty, three-quarters of which are granted through specific country quotas to Australia, China, Thailand and the United States. Shipments to Iraq and Saudi Arabia are set to remain unchanged in 2007 at their expected 2006 level of 1.2 million tonnes and 1.1 million tonnes, respectively. Likewise, the re-imposition of tight restrictions in Indonesia may constrain the level of rice imports to some 800 000 tonnes in 2007, the same level as expected in 2006. However, much will depend on the weather pattern in the coming months, as a resurgence of an El Niño anomaly could have major implications for the region as a whole and for the country in particular.
Rice consignments to countries in Africa are forecast to rise to 9.4
million tonnes, 100 000 tonnes above the 2006 current estimate, mainly
on account of larger shipments to Cote D’Ivoire, Mauritania, Senegal
and the United Republic of Tanzania. Imports by Nigeria, which
the Government wanted to forbid as of 2007, are expected to continue flowing
into the country, but a tightening of controls may contribute to lower
them by 100 000 tonnes to 1.7 million tonnes. The Government seems to
have realized that its plan to impose an import ban on rice would not
be consistent with WTO obligations. Nonetheless, it has still some leeway
for raising the level of protection as import tariffs were bound at the
WTO at 150 percent, with the possibility to add a supplementary 80 percent
for administrative purposes. In 2005, rice imports were applied a 50 percent
tariff, plus a 50 percent additional levy, and other surcharges. Moreover,
to avert an underestimation of their value, rice imports have been subject
to a minimum price, depending on the country of origin.
The deterioration of production prospects in 2007 may now result in a tighter supply/demand situation on the world market in 2007. Nonetheless, relatively large stock availabilities in Thailand and good crops in Cambodia, Egypt and Myanmar could help sustain a modest expansion in world exports to 28.9 million tonnes in 2007, 300 000 tonnes more than expected in 2006. On the other hand, reduced export availabilities are likely to depress sales from Australia, Ecuador, India, Japan, the United States and Viet Nam.
InThailand , the interim government recently announced its intention to dispose of its large public stocks within one year through bi-monthly tenders, with fragrant rice released for sale on both the domestic and export markets, while white rice would be exclusively destined to export. In view of the negative crop expectations in 2006, those supplies would be instrumental to help the country raise its exports by 1.3 million tonnes to 8.8 million tonnes in 2007. The 2006 bumper crop in Egypt could help it to ship 1.1 million tonnes of rice in 2007, 10 percent above the level anticipated in 2006. After imposing temporary restrictions on exports in September, the Government again allowed exports of milled rice in October, while maintaining the prohibition for husked rice. The impact of this restriction is likely to be rather small as the bulk of Egypt’s rice imports consists of milled and broken rice. Abundant supplies from the 2006 excellent crop should enable Pakistan to maintain exports at 3.5 million tonnes, although traders may face higher tariffs on sales to eastern Africa (Kenya, Uganda and the United Republic of Tanzania) and to the Islamic Republic of Iran. A recent agreement with Viet Nam to let rice from Cambodia enter its territory free of duty would also boost Cambodia’s exports. Most of the other major rice exporters, including Ecuador, India, Japan, the United States, Uruguay and Viet Nam may face difficulties in keeping shipments on sale in 2007 at the same level as in 2006, because of supply constraints. Australia , in particular, may become a net rice importer in 2007, in light of the dismal rice crop prospects. India’s shipments could also be negatively influenced by high domestic prices, in particular for Basmati rice, the planting of which is reported to have declined substantially this season. In addition, a recent decision by the exporter association to establish a minimum export price level for basmati rice, would also sustain their quotations. Scant supplies in Viet Nam instigated the Government to restrict exports in November 2006. As the scarcity is likely to persist until March/April 2007, when the winter/spring crop would be harvested, tight supply conditions may constrain sales in 2007 below the 2006 expected level, especially if a recently announced agreement with Thailand, to let Viet Nam export prices converge to the (higher) Thai quotations, is carried through. In the case of the United States , the retrenchment from the market reflects expectations of high domestic prices as well as the imposition of testing requirements by several importing countries, following findings of the unauthorized, genetically modified LLRice 601 in United States long grain rice shipments.
Total rice consumption in 2006/2007 is anticipated to rise by around 4 million tonnes to 421 million tonnes, in milled equivalent. As usual for rice, the bulk of it will be destined for food consumption purposes, or about 372 million tonnes. On average, per caput rice consumption is anticipated to remain largely unchanged at some 56.9 kg per year, influenced by expectations for the developing countries of stagnating per caput intake. Consumption in the developing countries is forecast to remain at around 68.5 kg per capita per year, while it may increase somewhat for developed countries, to 12.8 kg per year. low-income food-deficit countries (LIFDCs), however, may face a small decline in per caput availabilities, mostly reflecting limited production growth prospects and forecast of static imports.
World rice inventories at the close of the crop seasons in 2007 are now set to be cut to less than 105 million tonnes, slightly below their opening level, reversing previous expectations of a stock rebuilding. The change in the outlook follows mainly from the deterioration of crop prospects in several major producing countries, which will constrain many of them to dent on their reserves to meet domestic consumption and, in the case of exporters, export demand. Among traditional exporting countries, only China and India are anticipated to close the season with a small increase in rice inventories, sustained, in the case of China, by rising production and static domestic consumption, while in India, it would mainly be a reflection of an expected decline in exports in 2007. Most of the other rice exporters are likely to end the season with smaller carry-overs. For instance, in Thailand, a drawdown would be required to meet rising domestic requirements and a sizeable increase in exports in 2007, in the face of lower production this season. Much of the stock contraction is likely to concern rice owned by the Government. Relatively poor crops could also compel Viet Nam, not only to reduce the volume of its shipments, but also to draw supplies from its reserves. Likewise, the anticipated drop of production in the United States may result in smaller end-of-season inventories. As for Pakistan, the maintenance of a high level of sales abroad could also entail a cut in reserves. At present, closing stocks in Egypt are not expected to change much.
Among the non-traditional exporting countries, Cambodia, the Islamic Republic of Iran, Myanmar and Sri Lanka are all expected to use part of their production gains this season to reconstitute their rice reserves. The increase in production could also foster a build-up in Nigeria, Senegal and t he United Republic of Tanzania. By contrast, fast consumption growth in Bangladesh will likely result in smaller reserves, despite rising imports. Similarly, stocks in Brazil, Indonesia, Japan and the Republic of Korea are also expected to be cut in light of the poor 2006 production outcomes.
The expected fall in global stocks carried over into 2007 would also influence negatively the rice stocks-to-utilization ratio, which provides an indication of the extent to which rice reserves could cover rice consumption in 2007, and hence. of food security. According to current forecasts, the ratio would fall to 24.6 in 2007, compared with 25.0 in 2006.
1. Basmati 217, Basmati 370, Basmati 386, Kernel(Basmati), Pusa Basmati, Ranbir Basmati, Super Basmati, Taraori Basmati (HBC-19) and Type-3 (Dehradun)
|GIEWS||global information and early warning system on food and agriculture|