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FAO Rice Market Monitor (RMM)

The FAO Rice Market Monitor (RMM) provides an analysis of the most recent developments in the global rice market, including a short-term outlook. Presently, the full document is available only in English but highlights are available in Spanish and French. Monthly updates of selected rice export prices are available on the FAO Rice Price Update. To subscribe to the FAO Rice Market Monitor and the FAO Rice Price Update, please send an e-mail to the RICE MARKET NETWORK with "subscribe" in the subject line.


FAO Rice Market Monitor, December 2016, Volume XIX - Issue No. 4

ROUND-UP

With main-crop harvests nearing completion in the northern hemisphere, FAO now anticipates world paddy production in 2016 to reach 748.0 million tonnes (496.7 million tonnes, milled basis), which is 1.8 million tonnes less than reported in the October issue of the RMM. The revision primarily mirrors deteriorated crop prospects in China (Mainland), where officials indicate that exceptionally wet conditions this year undermined output by a greater margin than anticipated. With crops similarly impaired by inclement weather, Ecuador and Viet Nam are also seen gathering less than previously projected. All combined, downward revisions to production in these countries more than outweighed all other upward adjustments, the largest of which concerning Bangladesh, Guinea, Mali and Nepal.

Despite the revision, the forecast level of 748.0 million tonnes would continue to suggest a record outcome to the 2016 campaign, with global paddy output exceeding the 2015 subdued level by 8.1 million tonnes, or 1.1 percent. The upturn is forecast to rest on larger plantings of close to 163.1 million hectares, while world yields remain little varied year-to-year at a robust 4.6 tonnes per hectare. Asia is projected to lead the year’s production rebound, garnering a record of 676.5 million tonnes, up 7.3 million tonnes from 2015, largely thanks to more normal weather patterns this season. These took the form of plentiful monsoon rains, which permitted plantings in northern hemisphere Asia to regain pace, more than compensating for weather induced shortfalls incurred earlier in the year along and south of the Equator. Although the abundant rains also translated into crop losses, most notably in China (Mainland), they are expected to foster sizeable recoveries in the Philippines, Thailand and, especially, in India. Cambodia, the Chinese Province of Taiwan, the Islamic Republic of Iran, Iraq, Japan, the Democratic People’s Republic of Korea, the Lao People’s Democratic Republic, Myanmar, Nepal and Pakistan are also poised to gather more this season, more than compensating for falls in China (Mainland), Indonesia, in the Republic of Korea, Malaysia, Sri Lanka and Viet Nam.

Growing conditions have also proven conducive across much of Africa, where 2016 production is now forecast to expand by 5 percent to an all-time high of 30.2 million tonnes. Within the region, Guinea, Mali, Nigeria and the United Republic of Tanzania are all headed towards bumper crops, with production in Egypt also set to recover after attractive prices and a move away from cotton cultivation underpinned plantings. Gains in these countries would more than compensate for reductions in Cote d’Ivoire, Malawi, Mauritania, Mozambique and Zambia, in most cases owing to late and poor performing rains. The outlook is more subdued for Latin America and the Caribbean, pointing to a six-year production low of 26.1 million tonnes. The reduction would stem from losses incurred by Argentina, Bolivia, Brazil, Ecuador, Guyana, Paraguay, Uruguay and Venezuela to a combination of unfavourable weather and prospects of reduced margins, with early season dryness and storm damages also slowing the pace of recoveries across Central America and the Caribbean. In North America, notwithstanding disruptions posed by extensive August floods, production in the United States is set to rebound to its second highest on record, as poor margins for competing crops instigated a surge in plantings. Inroads in Italy and the Russian Federation are also expected to sustain a small production advance in Europe, while limited and costly water supplies for irrigation caused output in Australia to slump.

Since the October issue of the RMM, FAO has lowered its forecast of international rice trade in calendar 2016 by 1.1 million tonnes to 42.0 million tonnes (milled basis), representing a 6 percent reduction from the already depressed 2015 outcome. The subdued outlook mostly follows prospects of a more pronounced cut in Asian deliveries than previously anticipated, mirroring the combined effects of improved local availabilities and more restrictive trade policies. This was especially the case for Bangladesh, China (Mainland), the Islamic Republic of Iran and the Philippines, which have been behind the downward revision in world import prospects. The reduction in Asian purchases, added to an only timid recovery in consignments to Africa, as demand in the region remained limited for a second successive year by good harvests and depreciating currencies. This tended to overshadow gains in Europe, North America and, especially, Latin America and the Caribbean, where output shortfalls and high local prices drove purchases to a new record. On the supply side, Viet Nam is anticipated to stand most affected by the retrenchment in world rice deliveries in 2016, having its shipments depressed to a seven-year low in the aftermath of an output shortfall and reduced demand from key outlets. Nonetheless, Australia, Brazil and India all saw shipments undermined by output contractions, with exports by Myanmar also impacted by Chinese efforts to curtail unofficial imports across borders. Instead, ample availabilities on store have permitted Argentina, Pakistan, Paraguay, Thailand, the United States and Uruguay to ship more this year, along with Cambodia, China (Mainland), the European Union and the Russian Federation.

Looking ahead, FAO anticipates global rice deliveries in calendar 2017 to reach 42.9 million tonnes, implying a partial (2.0 percent) recovery from the 2016 depressed level. The upturn rests on expectations that more attractive prices abroad will encourage a somewhat livelier pace of imports by key Asian and African buyers, who have seen their availabilities reduced by production shortfalls or by a low pace of imports in 2016. This is even if the import outlook for both regions remains tempered by lingering constraints posed by weak local currencies and restrictive import policy measures, factors that are likely to keep purchases well below heights attained in 2014 or 2015. Prospects are more buoyant for Europe and North America, where strong local demand could underpin further gains next year. Buying interest could instead wane somewhat in Latin America and the Caribbean, amid larger local crops and easing domestic quotations. Among the exporters, an output recovery is envisaged to permit India to retain its primacy in the world trade arena for a sixth successive year. Australia, China (Mainland), Pakistan, the United States and Viet Nam are similarly envisaged to boost exports in 2017, as opposed to Argentina, Brazil, Cambodia, Guyana, Myanmar, Paraguay, Thailand and Uruguay which could see their shipments fall amid heightened competition for markets.

Despite a 1.0 million tonne downward revision, world rice utilization in 2016/17 is forecast to exceed the 2015/16 high by 5.2 million tonnes, reaching 500.2 million tonnes (milled basis). The projected increase would be sustained by 1.5 percent advance in global food use to 402.5 million tonnes, primarily mirroring gains in Asia, owing to population growth, and upbeat demand in Africa, following improved availabilities and easing prices. Instead, quantities destined to animal feed and other end uses (namely seeds, post-harvest losses and industrial uses) are seen hovering around 18.0 and 79.7 million tonnes, respectively. Based on these tendencies, global per caput food use in 2016/17 is likely to pass from an average of 54.1 kilos per person in 2015/16 to 54.2 kilos per person this season.

As global production is forecast to fall only slightly short of utilization in 2016/17, global rice inventories at the close of 2016/17 marketing years are seen posting a modest (0.4 percent) decline to 170.3 million tonnes (milled basis). This would result in the world stocks-to-use ratio passing from 34.2 in 2015/16 to a still abundant 33.5 percent this season. At a country level, India and Thailand are envisaged to lead the reduction in world rice stocks, along with Australia, Bangladesh and Brazil. Yet, drawdowns in these countries stand against prospects of accumulations elsewhere, in particular in China (Mainland), Colombia, Egypt, the United States and Viet Nam.

Although prices have followed diverging trends depending on the origin and quality, harvest progress and subdued buying interest have tended to keep international rice prices in check in recent months. This was reflected in the FAO All Rice Price Index (2002-2004=100), which has hovered around a value of 185-186 points since October. Looking at the various market segments, a somewhat livelier pace of sales, together with Thai efforts to shore up local quotations, resulted in the Higher Quality Indica Index edging up by 1 percent since October to a mid-December value of 170 points. More active trading activity in the Far East also aided a 2 point advance in the Japonica Index to 219 points. Yet, these gains were contrasted by a 1 percent decline in the value of the Aromatica and Lower Quality Indica indices, following the arrival of freshly harvested Hom Mali rice into the market and easing tightness of fully broken supplies. From an annual perspective, international quotations in 2016 stood 8 percent below their levels in 2015, reflecting soft Japonica and Aromatic quotations. Indica prices tended to be less affected by the weakness, given production disruptions incurred in the first half of the year. These stood 2 percent below 2015 levels in the case of higher quality Indica rice, but 2 percent over last year’s values in the case of lower quality Indica supplies.

RMM December 2016

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