FAO Rice Market Monitor, April 2016, Volume XIX - Issue No. 1
With the exception of a few northern hemisphere countries that are still harvesting their last crops, the 2015 paddy season is closed by now. Reflecting the influence of the El Niño weather anomaly, the global outlook has deteriorated if compared to December expectations, mostly on worsening prospects for India, the DPR Korea, Myanmar and Thailand. At the current forecast of 738.2 million tonnes (490.3 million tonnes, milled basis), global paddy production in 2015 would trail 0.8 percent behind the already poor 2014 outcome, depressed by a 1.3 percent dip of plantings to 160.6 million hectares, as average paddy yields rose slightly to 4.60 tonnes per hectare. From a regional perspective, much of the 2015 fall would concentrate in Asia, where plantings were curtailed for a second successive season owing to poor rains. Thailand, India, the Philippines, the DPR Korea and Myanmar were responsible for much of the decline, in sharp contrast with China (Mainland), Indonesia and Sri Lanka, which harvested bumper crops. Despite drought-constrained crops across Southern and Eastern Africa and abnormally high temperatures in Egypt, production for the whole of the region is estimated to end only 1 percent below the 2014 record, amid an excellent seasonal outturn in Western Africa. In Latin America and the Caribbean, favourable weather boosted production to new heights in South America, more than offsetting losses associated with El Niño-induced droughts in Central America and the Caribbean. In the other regions, output was depressed by low prices and unfavourable weather in the United States and by recurring problems of water scarcity in Australia, while prospects of favourable margins fostered a production recovery in Europe.
Turning to the 2016 season, climate predictions indicate that after peaking in November-December 2015, the current strong El Niño event is likely to gradually dissipate in the next few months, with a 50 percent chance that it will give way to its opposite, La Niña, in August-October. The tailing influence of El Niño, however, already marred the 2016 production outlook of countries south and along the Equator, where the first crops of the season were sown in the fourth quarter of 2015. By contrast, the portended return to neutral-El Niño conditions by June 2016 bodes well for the sector in the Northern Hemisphere countries, as the month coincides with the bulk of main crop plantings. Amid expectations of a more normal unfolding of the season, FAO has set its first global production forecast for 2016 at 745.5 million tonnes (495.2 million tonnes, milled basis), only 1.0 percent above the current estimate for 2015. Underlying such a conservative 2016 outlook are setbacks already incurred by Southern Hemisphere producers, along with prospects of limited returns. Among the various regions, Asia is expected to drive the 2016 global production recovery, spearheaded by an upturn in India and Thailand, but also in Myanmar, DPR Korea, Nepal and the Philippines, and by steady increases in Bangladesh and China (Mainland). Under expectations of continued strong official support, production in Africa is expected to increase, underpinned by a rebound in Egypt, continued brisk growth in Western Africa and mild recoveries in Southern and Eastern Africa. In Latin America and the Caribbean, poor margins and El Niño-related droughts/floods have marred the outlook for South America. Output is also set to rebound in North America (the United States) and in Europe. Instead, in Oceania, Australia is heading towards another negative season, amid a further tightening of water supplies.
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At 44.6 million tonnes, FAO’s estimate of international rice trade in calendar 2015 continues to point to a 2 percent contraction from the 2014 record. West African countries were much behind the lower volume of trade last year, as good crop harvests and/or depreciating currencies curbed their imports. However, greater purchases by countries in the Far East, including China (Mainland), Indonesia, the Lao PDR and the Philippines, raised Asian imports to new heights. Elsewhere in the world, import demand remained robust in Europe, the United States and, especially, in Latin America and the Caribbean, where production shortfalls accelerated the rate of purchases. Among exporters, Thailand bore much of brunt of the 2015 trade contraction. Although shipping somewhat more than last reported, the country saw itself consistently outcompeted in price sensitive markets. New estimates have instead lowered 2015 exports by India, even though competitive prices kept its deliveries close to 2014 records, confirming the country as the world’s leading rice exporter for the fourth consecutive year. Argentina, Australia, China (Mainland), Egypt, the European Union, Myanmar, the Russian Federation, Paraguay and Uruguay all saw shipments fall in 2015, while Brazil, Cambodia, Guyana, Pakistan, the United States and Viet Nam exported more.
FAO’s current forecast suggests only a modest 1 percent recovery in international rice trade in 2016 to 44.9 million tonnes. Looking at the various regions, high domestic prices, along with efforts to reconstitute stockpiles and mitigate supply shortfalls, are expected to keep Asian imports sizeable, sustained by greater purchases by Indonesia and the Islamic Republic of Iran. This is even as improved domestic availabilities, combined with more restrictive tariff regimes, prompt some traditional Asian buyers to cut rice inflows. Deteriorating output prospects or stubbornly high quotations are instead forecast to lift shipments to Latin America and the Caribbean to new heights, with firm domestic demand also underpinning purchases by the United States and the EU. Imports by Africa are predicted to rise only slightly above the 2015 depressed level. The little increase would reflect greater needs in Southern Africa, as otherwise comfortable supply situations and/or financial constraints may again dampen imports in the rest of the region. On the export side, the modest recovery in 2016 world trade would reflect a general tightening of supplies, as various important rice origins have faced successive poor harvests. India, in particular, may witness a sharp contraction, while shipments by Thailand are likely to remain steady around the 2015 reduced level. Less attractive sale prices, often the result of supply shortfalls, could weigh on exports by Australia, Brazil and the United States. By contrast, these are expected to rise in the case of Argentina, Cambodia, Pakistan, Paraguay and Uruguay and Viet Nam.
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World rice utilization in 2015/16 is assessed at 496.2 million tonnes (milled basis), 1 percent more than in the previous year. Of these, about 400 million tonnes are expected to be for direct human food consumption, 1.2 percent more than in the previous year. This would give way to an average 54.4 kilos per caput food intake, slightly superior to the previous year’s estimate owing mainly to a small gain in Asia to 78.7 kilos per person. Based on FAO’s first outlook, global rice utilization in 2016/17 could increase to 503.4 million tonnes, again propped up by an expansion of food consumption to 405 million tonnes.
Global rice inventories at the end of 2015/16 are projected to fall to 168.9 million tonnes. The 3 percent annual decline would position the world stocks-to-use ratio at 33.5 percent in 2015/16, down from an estimated 35.0 percent in 2014/15. The five major rice exporters are anticipated to lead the decline, amid generally poor 2015 crops gathered and government efforts to trim public inventories. Overall, the five countries are seen slashing inventories by a quarter to 32.0 million tonnes, which would lower the groups’ stock-to-disappearance ratio to 18.1 percent, down from 23.9 percent in 2014/15 and its lowest level since 2008/09. FAO’s first forecast of world rice stocks carried out from the 2016/17 seasons, has been set at 164.0 million tonnes, implying an additional 3 percent drawdown of reserves and a global stocks-to-use ratio of 32.0 percent in 2016/17, the lowest in five years. Like in 2015/16, much of the inventory reduction is expected to arise from the five major exporters, lowering their stock-to-disappearance ratio in 2016/17 to a ten-year low of 14.7 percent.
International rice export prices were little changed in the first quarter of 2016, remaining close to the low levels witnessed in late 2015. As a result, the FAO All Rice Price Index (2002-2004=100) remained steady around 195-197 points. Across individual segments, the Higher and Lower Quality Indica Indices have stabilised since the start of 2016 around 180 and 181 points, respectively. The Japonica Index also stayed close to its December value at 242 points. Meanwhile, downward pressure continued unabated in the fragrant rice segment, with the Aromatica Price Index sliding to 142 points, 6 percent below December and the lowest level since March 2007. Looking ahead to the coming months, international prices will have to balance rather subdued demands from importers against increasingly tight availabilities in exporting countries, at least until the last quarter of the year, when the bulk of 2016 production will be harvested. However, given the shrinking stocks available in exporting countries, much of which are in Government hands, the market looks particularly vulnerable to sudden demand surges or policy changes, which could boost price volatility.