|Global Market Analysis|
World prices decline
In line with earlier expectations, international prices of the major traded rice varieties have been weakening in the past several months. The slide was particularly pronounced for the Indica rice with a high percentage of brokens, which was priced 36 percent less in January-May 2009 than in the first five months last year. Over the same time periods, the prices of the higher quality Indica and of aromatic rice varieties dropped by 17 percent and 9 percent respectively. On the other hand, the Japonica, medium grain, rice, followed a diverging trend, with prices up by 75 percent, largely reflecting concerns over global export availability, amidst poor production prospects in Australia, the retention of export curbs in Egypt, and pressure for water allocations in the State of California, which constitute the main sources of Japonica rice trade. The strengthening of Japonica prices sustained the FAO All Rice Price Index (2002-2004=100), which averaged 270 in January-May 2009, marginally below its corresponding value in 2008. The slide of international Indica and Aromatic rice prices is consistent with the excellent crops gathered by most exporting countries in late 2008 and early 2009 and a relatively sluggish world import demand. However, given the excellent crops gathered in virtually all regions the decline appears relatively contained. For instance, the benchmark Thai 100% B rice was quoted USD 556 in May 2009, 42 percent less than the record USD 963 per tonne posted in May 2008, but still well above its 2007 average value of USD 335 per tonne. Indeed, although declining, rice export prices continued to be underpinned by export restrictions and producer price support in major exporting countries, which had the effect of withholding supplies away from world markets.
The 2008 paddy season has just been completed with the harvesting of secondary crops in Asia. Boosted by excellent results of these crops, global paddy production is now estimated at 689 million tonnes, equivalent to 460 million tonnes of milled rice, well above earlier expectations and 4.3 percent more than in 2007. But the sector’s attention is now turning to the 2009 season, which is already well advanced in all but the critically important south-eastern Asian region, where farmers are awaiting the imminent arrival of the monsoon rains to plant their crops. Preliminary information on plantings and crop development over the 2009 season has been favourable. As a result and assuming a normal rainfall pattern in Asia in the coming months, world production in 2009 could gain a further 1 percent and reach 696 million tonnes (465 million tonnes, milled equivalent). The relatively moderate increase expected in 2009 reflects less attractive prospects for producer returns. However, in spite of financial constraints, many governments have maintained their support to the sector through input subsidies, investment programmes and direct price incentives, which, barring any major setback, is likely to sustain production growth.
Only part of the increase in world output in 2009 is expected to originate in Asia, where some 626 million tonnes are expected to be harvested, up from 624 million tonnes in 2008. Indeed, several countries are reporting lower plantings by farmers, as expectations over prices deteriorate. Output may recover in those countries that suffered severe setbacks last season, in particular Afghanistan, the Islamic Republic of Iran and Iraq, which suffered from drought problems, the Democratic Republic of Korea, where a lack of fertilizers hindered crop development, and Myanmar which was hit by cyclone Nargis, prior to the start of the 2008 season. On the other hand, sizeable increases are expected in Cambodia, India, Indonesia, the Philippines, Sri Lanka and Vietnam, spurred by continued public support to the sector.
World trade in rice in 2009 is expected to recover by 2 percent to 30.9 million tonnes, the second largest volume on record. The increase would be facilitated by less prohibitive world prices, which would boost import demand. To a large extent, the expectation of a recovery hinges on a further easing of the export curbs that constrained trade in 2008.
In Asia, lower international prices and/or attempts to build up reserves are expected to sustain imports by Mainland China, Saudi Arabia and the United Arab Emirates, while both Japan and the Republic of Korea are likely to buy more to fulfil their WTO minimum quotas. The Islamic Republic of Iran, Iraq and the Democratic Republic of Korea may also need to step up imports to compensate for the 2008 crop shortfalls. Shipments to the Philippines, which stood out as the leading rice importer in 2008, are officially forecast at 2.4 million tonnes, almost 100 000 tonnes more than last year, and one of the highest level on record. On the other hand, several countries, among which Bangladesh, but also Indonesia, Malaysia and Sri Lanka might find themselves in an enviable position to cut purchases after harvesting excellent crops.
Part of the anticipated rise in world exports in 2009 would be on account of India, which is expected to ship 4 million tonnes, up from 3.7 million tonnes in 2008. Although the government has kept its control over non-basmati rice exports, it has allowed larger volumes to be channelled through state-controlled entities. However, given the large availabilities held in public stocks, the country could step its exports even further, should restrictions on private sector trade be eliminated. Competitive prices are also expected to boost sales from Argentina, China, Myanmar, Pakistan and Viet Nam.
Per caput rice consumption stable in 2009
At the aggregate level, total utilization of rice is forecast in the order of 450 million tonnes, on a milled basis, 2.7 percent more than in 2008. Of these, world consumption as food is to account for 85 percent, or 385 million tonnes, the remainder corresponding to seed, feed and other uses, including post-harvest losses. Prices in domestic markets have been reported falling in recent months, but rice remains substantially more expensive to consumers than it was in 2007, prior to the price surge. On the other hand, international rice quotations, while falling, remain high relative to previous years, which together with rising freight rates, is also keeping the local prices of imported rice firm. Consumers in many countries have been affected this year by the erosion of their purchasing power as economies slowed down or contracted. A worsening of incomes, however, usually tends to give support to consumer demand for rice, at the expense of higher-priced products such as dairy or meat. As a result, per caput rice consumption is set to remain around to 57 kg.
Table 6. World rice market at a glance
1 Calendar year exports (second year shown)
2 Major exporters include India, Pakistan, Thailand, the United States of America and Viet Nam
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/esc/en/15/70/highlight_71.html
* Jan-May 2009
Good crops to boost world rice inventories in 2009 to their highest level since 2001
The buoyant 2008 production results are estimated to have boosted world rice inventories at the close of the marketing season in 2009 by 10 percent to a seven-year high of 120 million tonnes. All of the accumulation is set to take place among developing countries, while stocks in the developed are estimated to end lower. Under the current positive prospects for crops over the on-going paddy season, global production in 2009 would again exceed utilization, which would boost the 2010 ending stocks by a further 7 million tonnes, to 127 million tonnes. The bulk of the increase is forecast to be concentrated among exporting countries, in particular China, India, Thailand, the United States and Viet Nam, although Myanmar may have to draw from its reserves, especially if it increases exports in the course of the year. Good crops in traditional importing countries, may also allow them to raise rice reserves slightly above the 2008 level, which was relatively high compared to previous years. However, Bangladesh and the Philippines, two of the most important rice importers, look set to end their season with smaller carry-overs. The increase in global inventories in 2009 would help raise the world stocks-to-use ratio, which give an indication of world food security, from 26.3 in 2008 to 27.2 in 2009, the highest level since 2003.
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