International rice trade: a review of 1999
and prospects for 2000¹

S. Mbabaali

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

INTRODUCTION

Global paddy output in 1999/2000 reached 598 million tonnes, representing a 2.6 percent rise on the previous season which was substantially above the 1 percent rise registered in 1998/99.

Rice production, consumption and trade are concentrated in Asia, so events in that region usually set the tone for the rest of the international rice market. In Indonesia, paddy output for the 1999/2000 season grew by about 2.5 percent, underpinned by almost equal rises in yields and area. In the Philippines, the increase, at 16 percent, was far more pronounced, reflecting an expansion of plantings, improved growing conditions, greater use of high-yielding varieties by farmers and an improved irrigation system. In Bangladesh, there was some localized flood-related damage to the 1999/2000 season rice crops in a few districts but, in general, the impact was minimal. The Government's estimate for the season's paddy production indicates a 4 percent increase on the previous season's, mostly a consequence of an expansion in area. Heavy rains during the later part of 1999 resulted in severe floods in central parts of Viet Nam, but the impact on rice production for the country as a whole was not very significant as the affected zones are not major rice producing areas. Overall, paddy output for 1999/2000 rose by about 4 percent, as a result of better yields. Paddy production in Thailand also registered an increase, estimated at slightly more than 2 percent and mostly resulting from an increased area.

Africa's paddy output for the 1999/2000 season is estimated at 17.4 million tonnes, up by 10 percent, a substantial improvement compared with the 4 percent drop experienced in the previous season. The increase is attributed to expansion of both area and yields in some major producing countries, particularly Egypt, the largest rice producer in Africa, but also in Côte d'Ivoire and Madagascar.

In South America, the 1999/2000 paddy season benefited from very favourable growing conditions compared with the previous year when adverse weather during planting and harvesting in several countries depressed the region's paddy crop season. Paddy output for the region as a whole expanded by about 26 percent, driven mostly by a 36 percent gain in Brazil, the region's largest producer and consumer.

FIGURE 1 World rice trade, 1998-2000

GLOBAL RICE TRADE DROPS IN 1999

The 1999 world rice trade is estimated to have declined by 9 percent from the all-time peak set in 1998, to about 25 million tonnes. The fall is attributed to a recovery in paddy output in the very same countries, particularly in Asia and Latin America and the Caribbean, that were responsible for driving trade to a record level in 1998. Overall imports into Bangladesh, Brazil, Indonesia and the Philippines, the four leading importers, fell from 12.1 million tonnes in 1998 to 7.8 million tonnes in 1999, bringing down their share in trade from 44 to 31 percent.
Although imports to Indonesia fell by more than 30 percent compared with 1998, the country remained the largest rice importer for the fifth consecutive year, with estimated purchases of 4 million tonnes in 1999. Indeed, the recovery in domestic paddy output was not enough, and large imports were still required to meet domestic needs. Purchases by Bangladesh fell by 28 percent to about 1.8 million tonnes, following a boost in domestic production. The other major importers in 1999 included the Philippines, with an import volume of slightly more than 1 million tonnes, followed by Brazil and the Islamic Republic of Iran, with 1 million tonnes each. By contrast, shipments to Africa are estimated to have risen by 11 percent, to slightly more than 5 million tonnes. In that region, Nigeria continued to be the major import market with an estimated volume of 900 000 tonnes, followed closely by Côte d'Ivoire, Senegal and South Africa.

In spite of the contraction in world trade, Thailand and Viet Nam, the two major exporters, managed to raise both the volume of their shipments and their shares in world rice trade in 1999, sustained by competitive pricing. This was mainly at the expense of rice exports from India, China and the United States, whose combined contribution fell from 42 percent to 33 percent.

FIGURE 2 Rice exports, Thailand and Viet Nam

INTERNATIONAL RICE PRICES FALL DURING 1999

International rice prices from most origins were on a downward trend during most of 1999, as good harvests in a number of the major exporting countries coincided with a production recovery in many of the major importing countries. The FAO Rice Export Price Index (1982-84 = 100) started the year with a monthly average of 125 points in January and ended with an average of 105 points in December. For the year as a whole, the index averaged 114 points during 1999, down from the 1998 average of 127 points and the lowest since 1994. Prices for the lower-quality rice grades declined the most, as import demand for such qualities was particularly weak.

As far as individual prices were concerned, the price for the high-quality Thai 100B received some support towards the end of the year, lifted primarily by appreciation of the Thai baht against the United States dollar and the conclusion of another government-to-government deal with the Islamic Republic of Iran for 300 000 tonnes of rice. On the other hand, the expectation of a record crop in the United States, together with large inventories and limited import demand, weighed on that country's prices during most of the year. As a result, the price of the United States No. 2/4 percent broken followed a falling trend throughout 1999.

The combined effect of a recovery in Thai prices and a drop in United States prices led to a drastic narrowing of the price differential between the high-quality Thai 100B and the comparable United States No. 2/4 percent broken rice. The gap contracted from US$88 per tonne to about $43 per tonne between January and December 1999. As of February 2000, the gap had narrowed down further to $25 per tonne. If this trend persists, United States rice could soon start competing with Thai rice in the high-quality markets outside Latin America and the Caribbean.

FIGURE 3 Rice export price indices

TRADE IN 2000 IS FORECAST TO CONTRACT FURTHER

Assuming normal growing conditions during the course of the year, global rice trade in 2000 is provisionally forecast to fall by about 8 percent from the 1999 level, although even if this does happen, it will still be the third highest on record. Most of the decline is expected to be in Asia, as a number of the leading importers are likely to purchase less rice following a recovery in production in 1999 and/or the expectation of even higher output in 2000. In addition, world trade could be negatively affected by measures implemented by some countries and aimed at protecting domestic producers in the light of the low prices prevailing on the international market. Asian countries, in general, are expected to import 14 percent less rice than last year.

FIGURE 4 Differential between Thai and United States rice prices

Of particular significance is the new policy in Indonesia, the world's major importer, where the Government introduced a 30 percent duty on all rice imports, with effect from 1 January 2000. The level of the tariff will be re-evaluated every six months, depending on prevailing international rice prices and taking into consideration the interests of local producers. Increased production, together with the newly introduced tariff, could lead to a 30 percent reduction in Indonesia's rice purchases in 2000. Rice imports into African countries, however, are forecast to expand by about 4 percent. Export supplies are forecast to remain ample, since a number of the major exporting countries had bumper harvests, which were all-time highs in some cases. Given this imbalance on the international market and assuming normal growing conditions during the course of the year, international rice prices are forecast to remain generally under pressure until at least halfway through the year, when more information regarding harvests from the Southern Hemisphere and planting intentions in the Northern Hemisphere will be available. It should be pointed out that other factors will play an important role in influencing world prices. In Thailand, for instance, the Government intervened late in 1999 to sustain domestic prices through increased procurement and storage and by clinching government-to-government deals. Viet Nam, on the other hand, is endeavouring to improve the quality of export rice in an attempt to move to the higher end of the international market. Exchange rate movements will also be critical, as will the prices of oil, which affect the export earnings of several of the major rice importers.

Commerce international du riz: bilan de 1999 et perspectives pour l'an 2000

Selon les estimations, le commerce international du riz devrait, en 1999, avoir diminué de 9 pour cent par rapport au plus haut niveau historique atteint en 1998, pour s'établir à environ 25 millions de tonnes. La chute est liée à une reprise de la production, notamment dans les pays d'Asie, d'Amérique latine et des Caraïbes, responsables du niveau exceptionnel des échanges en 1998. Les importations totales du Bangladesh, du Brésil, de l'Indonésie et des Philippines, qui sont les quatre principaux pays importateurs, ont chuté de 12,1 millions de tonnes en 1998 à 7,8 millions de tonnes en 1999, leur part ne représentant plus que 31 pour cent du commerce mondial contre 44 pour cent auparavant. Toutefois, les importantes disponibilités exportables, et la diminution de la demande des importations, ont exercé une pression à la baisse sur les cours internationaux du riz, pendant presque toute l'année. L'Indice FAO des prix à l'exportation du riz (1982-84 = 100) a atteint en moyenne 114 points pour toute l'année, soit un recul par rapport aux 127 points de 1998, ce qui représente le niveau le plus bas depuis 1994. Pour l'an 2000, la situation est pour l'instant semblable à celle de l'année précédente, avec une réduction de la demande d'importations et d'importantes disponibilités exportables. Si les conditions de végétation sont normales au cours de l'année, les échanges de riz devraient, selon les premières indications, reculer d'environ 8 pour cent par rapport au niveau de 1999, mais se placer tout de même à la troisième place mondiale. Outre l'accroissement de la production de nombreux pays importateurs, les échanges devraient diminuer du fait des mesures introduites dans certains pays pour protéger les producteurs locaux en limitant les importations. Compte tenu des déséquilibres du marché international et de l'absence d'une offre significative et/ou d'une perturbation de la demande, les cours internationaux du riz devraient dans l'ensemble rester sous pression, pendant presque tout l'an 2000.

Comercio internacional del arroz: reseña de 1999 y perspectivas para el 2000

Se estima que el comercio internacional del arroz en 1999 ha bajado un 9 por ciento respecto de la cota máxima de 1998 jamás antes registrada, y que fue de unos 25 millones de toneladas. La caída se atribuye a una recuperación de
la producción de arroz cáscara en exactamente los mismos países, especialmente de Asia y América Latina y el Caribe, que fueron los responsables en llevar el comercio a un nivel récord en 1998. Las importaciones globales de Bangladesh, Brasil, Filipinas e Indonesia, los cuatro importadores principales, descendieron de 12,1 millones de toneladas en 1998 a 7,8 millones de toneladas en 1999, reduciendo su porcentaje en el comercio mundial del 44 al 31 por ciento. No obstante, las disponibilidades exportables fueron abundantes y, dada la contracción de la demanda de importación, ello dio lugar a una presión a la baja sobre los precios internacionales del arroz durante la mayor parte del año. Para el año en su conjunto, el índice de precios de exportación del arroz compilado por la FAO (1982-84 = 100) promedió 114 puntos, por debajo de la media de 1998 de 127 puntos, que fue la más baja desde 1994. Para el año 2000, la situación ha reflejado hasta ahora realidades del año anterior con un descenso de la demanda de importación en medio de unos abundantes suministros exportables. En el supuesto de que las condiciones de cultivo sean normales durante el transcurso del año, se pronostica de momento que el comercio mundial del arroz bajará un 8 por ciento respecto del nivel alcanzado en 1999, que, si se materializa, seguiría siendo la tercera cota máxima hasta ahora registrada. Además de aumentar la producción en muchos de los grandes países importadores, se prevé que el comercio resulte limitado por medidas introducidas en algunos países para proteger a los productores nacionales restringiendo las importaciones. Dado el desequilibrio existente en el mercado internacional y de no haber algún sobresalto importante del lado de la oferta y/o demanda, los pronósticos son que los precios internacionales del arroz se mantendrán por lo general sometidos a presión durante la mayor parte del año 2000.

¹ The information contained in this article is as of February 2000.