FAO Rice Market Monitor, October 2015, Volume XVIII - Issue No. 3
With main paddy crops in the northern hemisphere now at the harvesting stage, FAO has scaled back its forecast of global paddy production in 2015. Since its onset, the season has been marred by unfavourable climatic conditions, largely associated with the prevalence of the El Niño weather anomaly. As its influence is predicted to linger until the first months of 2016, the scope for recovering the losses incurred by the main crops through larger secondary harvests has diminished considerably. As a result, FAO now forecasts world paddy production in 2015 at around 742.6 million tonnes (493.0 million tonnes, milled basis), 6.5 million less than predicted in the July issue of the RMM. At that level, world paddy production would be 2.6 million tonnes, or 0.4 percent, below the 2014 already poor outturn, implying a second year of mute or negative growth.
In Asia, 672.3 million tonnes are forecast to be harvested in 2015, marginally below the disappointing 2014 output. Indeed, many countries in the region have endured adverse climatic conditions since the opening of the season. Particularly affected has been Thailand, where late and insufficient precipitation has hindered the main crop, also jeopardizing the secondary irrigated crop by preventing the recharge of reservoirs. In India, an erratic unfolding of the monsoon rains may curb production for the second consecutive season. A contraction is also forecast for the Democratic Republic of Korea, Nepal, Pakistan, the Philippines, the Republic of Korea and Viet Nam, due to abnormal weather conditions or unremunerative producer prices. On the other hand, widespread floods in July are anticipated to depress Myanmar’s production. These shortfalls are envisaged to be partly offset by sizable production gains in Bangladesh, China (Mainland), Indonesia and Sri Lanka. Crops in the southern parts of Indonesia are currently suffering from an extensive drought problem, but, as the bulk of the crops had already been collected earlier in the year with excellent results, the Government is looking towards a record 2015 output. Prospects for 2015 production point to a decline in Africa, where 28.3 million tonnes of paddy are expected to be harvested, 1.5 percent less than the excellent 2014 season performance. Much of the contraction would stem from production drops in Egypt and Madagascar, due, in the former, to excessively high temperatures damaging yields, and, in the latter, to belated and erratic rains. Poor and irregular precipitation is also behind expectations of declines in Nigeria and Ghana. Part of these falls will be compensated by increases elsewhere, especially in Mali and Guinea. In North America, the US Department of Agriculture forecasts a 14 percent reduction in paddy output in the United States to 8.6 million tonnes, largely attributed to low domestic prices, erratic rainfall and restrictions on irrigation water use in California and Texas. In Oceania, Australia’s official forecasts confirm a 12 percent reduction in 2015 output, as producers reacted to the high irrigation fees by cutting plantings. Prospects for production are more positive in the other regions. In Latin America and the Caribbean, good crops in South America, especially in Brazil, Colombia and Peru, are expected to foster a 2.6 percent increase, bringing the region’s total paddy output to 28.5 million tonnes. This would be notwithstanding a 4 percent contraction in Central America and the Caribbean, where most producers have been negatively affected by prolonged drought. In Europe, 4.2 million tonnes of paddy are forecast to be harvested this year, almost 4 percent more than in 2014, underpinned by excellent crops in the European Union.
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FAO estimates of international rice trade have been revisited since July to take unrecorded rice flows into better consideration. This raised the estimate of volume exchanged internationally to 45.3 million tonnes in 2014 (January–December), 2.6 million tonnes more than previously reported and an all-time high. Likewise, trade forecasts for 2015 and 2016 have also been adjusted upwards, now suggesting a 3.0 percent contraction to 44.0 million tonnes in 2015, followed by a 2.2 percent recovery to 45.0 million tonnes in 2016.
The fall in world rice trade in 2015 is expected to be import-driven, as availabilities in exporting countries remain ample. This reflects the abundance of supplies held by major importing countries, the result of either good harvests or large purchases last year, with further pressure added by weak local currencies. Import cuts may be particularly pronounced for Asian countries, especially Bangladesh, China, the Islamic Republic of Iran and Sri Lanka. Deliveries to African countries are also likely to dip in 2015, partly on account of Nigeria, where traders face difficult access to foreign exchange reserves. By contrast, shipments in Latin America and the Caribbean are foreseen to rise, sustained mainly by large imports by Cuba and Colombia, while a depreciating currency may curtail purchases by Brazil. In the other regions, the United States and, in particular, the EU looks set to step up their rice purchases. The expected decline in rice trade in 2015 would mostly impact Thailand’s exports, which are anticipated to drop by over 10 percent, largely reflecting smaller shipments to Africa, especially in the parboiled rice segment. Sales by India, Myanmar and Viet Nam are also forecast to fall, in the case of Myanmar, chiefly due to the imposition of an export ban between August and September-October. The weakening of demand by Brazil will weigh negatively on exports by Argentina, Paraguay and Uruguay. By contrast, consignments by Cambodia, Pakistan and the United States are anticipated to rise over the year.
Although still preliminary, forecasts for world rice trade in 2016 points to a 2.2 percent growth to 45.0 million tonnes. This level would imply only partial recovery, as many importing countries remain committed to achieving rice self-sufficiency, while several others continue to face foreign exchange constraints. Nonetheless, the trade recovery is expected to be led by a rebounding import demand by large traditional buyers, such as Indonesia, the Islamic Republic of Iran, Nigeria and the Philippines. Although more expensive local rice will continue to make imported rice attractive, deliveries to China may drop again next year, as control from the government may curb informal inflows. Imports by African countries, led by Nigeria, may also rebound in 2016, to relieve market tightness. Overall, shipments to countries in Latin America and the Caribbean look set to stabilise at highs in 2016, as larger inflows to Central America and the Caribbean offset a decline in South America. With a few exceptions, all the traditional exporters are expected to step up deliveries in 2016. In absolute terms, the increases will be largest for Thailand and, especially, Viet Nam, given the expected surge of imports in its traditional markets, Indonesia and the Philippines. Cambodia, Myanmar and Pakistan are also anticipated to ship more next year. By contrast, while remaining large, India’s exports may decline, especially if rising domestic prices erode its competitive edge. Shorter availabilities could also bring down sales by the United States, Brazil and Egypt. The non-renewal in 2016 of the Petro-Caribe bilateral agreement with Venezuela may also result in falling exports by Guyana.
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World rice utilization in 2015/16 is forecast at some 500 million tonnes (milled basis), 1.1 percent, or 6 million tonnes, more than the previous year. Growth is expected to be sustained mainly by increasing food intake, while rice use in animal rations may advance somewhat, despite strong competition from other grains and feedstuffs. As for food, the average per capita rice consumption is forecast to reach 54.7 kg in 2015/16, up slightly from 54.6 kg in 2014/15, facilitated by falling retail prices in Asia.
As global production is expected to fall short of utilization in 2015/16, world rice inventories in 2016 are forecast to fall by 3.5 percent, or almost 6 million tonnes, to 164.3 million tonnes. As a result, the world stocks-to-use ratio, an important indicator of food security, is anticipated to fall from 34.1 percent in 2015 to 32.3 percent in 2016. Much of the decline in 2016 world carry-over stocks is envisaged to take place in the major exporting countries, especially India and Thailand, given expected output cuts in these nations and official efforts to liquidate excess public stocks. Reserves are also anticipated to fall in Australia, Brazil, Cambodia, Myanmar and the United States. They may instead rise in Pakistan, Argentina, Guyana and Paraguay. By contrast, several importing countries, including China, Indonesia, the Republic of Korea and Sri Lanka, are likely to end the season with greatly increased inventories. Overall, the five major exporting countries (India, Pakistan, Thailand, United States and Viet Nam) are anticipated to carry less than 32 million tonnes in reserves in 2016, down from 42 million tonnes in the previous year.
The FAO All Rice Price Index (2002-2004=100) has been falling steadily since September 2014, averaging 206 points in September 2015, 6.3 points or 3.0 percent down from June 2015. The bearish tone came amid a lapse in import demand, which was exacerbated by currency depreciations in key global rice suppliers. The tendency for international rice prices to fall was general, dominating all market segments, particularly those of the lower quality Indica and aromatic rice. Only japonica varieties remained unaffected, with some support lent in this segment by prospects of even tighter supply availabilities owing to drought in Australia and California.