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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.

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FAO Rice Market Monitor, October 2017, Volume XX - Issue No. 3

Release date: 20 October 2017

ROUND-UP

With 2017 main-crops in the northern hemisphere now at the harvest stage, FAO has lowered its forecast of world paddy production in 2017 to 754.6 million tonnes (500.8 million tonnes, milled basis). This level would be only nominally changed (60 000 tonnes) from the 2016 all-time high, while falling 4.1 million tonnes short of July expectations. The downward adjustment primarily reflects deteriorated crop prospects in Asia, following a somewhat challenging climatic unfolding of the season, which has been characterised by abnormal dryness as in the case of Sri Lanka and the Democratic People’s Republic of Korea, floods in Bangladesh, or a combination of both as was the case of India and Nepal. All of these countries are now envisaged to see 2017 production reduced as a result. Current prospects also point to a second successive season of retrenchments in the Republic of Korea and Viet Nam, but these losses are likely to be compensated by larger crops elsewhere, thus keeping output in the sub-region only marginally below the 2016 all-time high at 682.1 million tonnes. Singularly, the largest absolute production gains are expected to take place in Indonesia and Thailand, although Cambodia, Pakistan and the Philippines are all headed towards record-breaking harvests. Increases are also envisaged in the Islamic Republic of Iran, Iraq, the Lao People's Democratic Republic, Malaysia, Myanmar and Turkey, while 2017 output stagnates in China (Mainland), although at a comparatively ample level.

The 2017 production outlook is more positive for Africa, pointing to aggregate output exceeding the 2016 record by 1 percent to reach 31.1 million tonnes. Another bumper harvest in West Africa is likely to be behind the feat, as ample rains have enabled producers in the sub-region to react to attractive prices and government assistance programs by expanding plantings. Within the sub-region, particularly favorable results are foreseen for Nigeria, Mali and Senegal. Combined with a mild yield-driven expansion in Egypt, these gains look set to outweigh a sharp output fall in Madagascar and, to a lesser extent, in the United Republic of Tanzania, where crops were hindered by erratic rains.

The latest forecasts also point an excellent 2017 result in Latin America and the Caribbean, where an all-time record of 28.4 million tonnes is set to be collected. The 7 percent annual rebound is despite damages inflicted by successive storms in the Caribbean, as well as generally lower plantings in South America owing to tight producer margins. At a country level, Brazil is expected to lead the region’s production expansion, although larger crops are also envisioned in Colombia, Guyana, Mexico and Uruguay, more than compensating for reductions in Argentina, Costa Rica, Chile, Ecuador and Peru.

In Oceania, officials in Australia confirm the positive turnout of the 2017 season, which saw output stage a three-fold recovery thanks to ample water supplies and still attractive producer margins. The opposite is the case in the United States, where plantings contracted sharply amid competition with other crops, while additional cuts were fostered by overly wet conditions. Area retrenchments in response to poor price prospects are also set to undermine output in Europe this season.

Following a 750 000 tonne upward revision, world trade in rice in calendar 2017 is now expected to amount to 45.0 million tonnes (milled basis), up 8.5 percent year-on-year and implying a full recovery from the 2016 depressed level. The expansion is expected to stem from brisk demand in Asia and Africa, led by greater imports by the Islamic Republic of Iran, Iraq, Madagascar, Nigeria, the Philippines and, especially, Bangladesh and Sri Lanka. Indeed, supply shortfalls and high domestic quotations have encouraged a particularly upbeat pace of imports by the South Asian countries, more than compensating for import reductions in Colombia, Indonesia, Ghana and Nepal. On the export side, ample exportable availabilities have promoted intense competition amongst the leading rice suppliers, India and Thailand, but also strong export comebacks from China (Mainland) and Myanmar. Greater shipments by these countries, along with Cambodia, the United States, Uruguay and Viet Nam, have come at the expense of deliveries by Argentina, Brazil and Pakistan. Continued export restraints are also set to lower deliveries by Egypt for the second successive year.

Based on current supply prospects, FAO tentatively forecasts international rice deliveries to expand by a modest rate of 1.0 percent in calendar 2018 to 45.4 million tonnes. Underlying the forecast growth are expectations of somewhat larger purchases by countries in Asia, in particular, Indonesia, Malaysia, the Philippines and Saudi Arabia, where supplies would be needed to refurbish dwindling inventories. This is even if generally ample local supplies and the continued pursuit of self-sufficiency policies could again keep Asian imports well short of heights seen in 2015 next year. On the other hand, import demand is forecast to stall in Europe and Africa, while it falls in Latin America and the Caribbean, depressed by good crops and higher international prices. Among suppliers, Argentina, India, Thailand, the United States and Uruguay are all envisaged to see their competitive edge eroded by more limited exportable availabilities in 2018. However, Australia, Brazil, Cambodia, China (Mainland), Guyana, Pakistan, Paraguay, and especially, Viet Nam, should count on sufficient supplies to more than compensate for these export reductions.

Notwithstanding a 2.6 million tonne downward adjustment since July, world rice utilization in 2017/18 is still predicted to expand by 1.1 percent to 503.2 million tonnes (milled basis). Food use is forecast to account for all of this growth, absorbing 406.6 million tonnes, 1.4 percent more than in 2016/17. This level would be sufficient to sustain a small (0.2 kilo) advance in global per capita food consumption to 53.8 kilos. All other uses are seen essentially unvaried year-to-year, with animal feed accounting for 17.8 million tonnes, while seeds, non-food industrial uses and post-harvest losses absorb another 78.8 million tonnes.

FAO’s forecast continues to point to minor, 0.4 percent, expansion in global rice inventories at the close of 2017/18 seasons to 169.2 million tonnes (milled basis). Much of this increase is expected to concentrate in China (Mainland), although Bangladesh, Brazil and the Philippines are also expected to close the season with more rice on store. By contrast, current prospects point to sharp drawdowns in some major rice exporters, namely Thailand and the United States, along with Sri Lanka and the Republic of Korea. As a result of these trends, the world stocks-to-use ratio is still seen at an comfortable level 33.1 percent in 2017/18, but the major exporters’ stock-to-disappearance ratio could be reduced to a tenyear low of 16.9 percent.

International rice prices have posted steady, but modest, gains since July. This was reflected in the FAO All Rice Price Index (2002-04=100) passing to a mid-October average of 217 points, up 3 percent from July levels. All of this recent strength has mirrored seasonal supply constraints in the fragrant and medium/short grain markets, exacerbated by harvest delays. These factors lifted the mid-October values of the Aromatica and Japonica Indices by 6 and 8 percent, respectively, to 220 and 250 points. Although at those levels the two sub-indices stood at multi-year highs, equally striking has been the relative price stability of the more widely traded Indica rice since July, considering that the bulk of freshly harvested crops in the northern hemisphere have yet to reach the market. Indeed, stiff competition among Asian suppliers to secure sales to the Far East and West Africa have tended to keep high quality Indica values in check, as reflected in the Higher Quality Indica Index hovering around a value of 187 points since July. Sentiment has been weaker in the lower quality Indica market, where prices have faltered by 5 percent since July, pressured by weak buying interest.

RMM October 2017

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