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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, October 2016, Volume XIX - Issue No. 3


The 2016 season is well advanced, as main crops in the northern hemisphere have reached the harvesting stage, with various countries now readying to sow offseason crops. Since July, FAO has raised its forecast of world paddy production in 2016 by 2.9 million tonnes. The revision primarily mirrors improved crop prospects in Asia, where weather conditions have enabled cropping activities to unfold considerably better than in the past two seasons. This was the case in India, which accounted for much of the upward adjustment, but the outlook also improved for Brazil, Cambodia, Colombia, the Islamic Republic of Iran, Nigeria and Thailand. Instead, prospects deteriorated in China (Mainland), the United States and Viet Nam.

Taking these revisions into account, world paddy production is now anticipated to reach a record of 749.7 million tonnes (497.9 million tonnes, milled basis). This level would exceed the 2015 depressed outcome by 10.1 million tonnes, marking the first global production expansion to occur since 2013. The feat would be sustained by a 1.6 percent area increase to 163.3 million hectares, an expansion made possible by more normal weather patterns following the return to ENSO neutral condition last May. This has been especially the case in Asia, where abundant monsoon rains have enabled plantings to regain momentum. The region is now envisaged to gather a high of 678.6 million tonnes in 2016, up 1.4 percent year-on-year. Much of the season’s projected growth would be underpinned by a rebound in output in India. Nonetheless, easing drought constraints are also expected to support marked improvements in the Philippines and Thailand, with Cambodia, China (Mainland), the Democratic People’s Republic of Korea, the Islamic Republic of Iran, the Lao People’s Democratic Republic, Myanmar and Nepal similarly headed towards larger crops. This would more than compensate for poor results in Indonesia, Malaysia, Sri Lanka and Viet Nam, owing to unfavorable weather, and in Bangladesh and the Republic of Korea, due to price or policy-driven area cuts.

The outlook is similarly positive for Africa, with 2016 output in the region poised to expand by 4 percent to a record of 29.7 million tonnes. At a country level, production is set to recover in Egypt, as high local prices and a shift away from cotton cultivation boosted plantings in the country. Prospects also point to continued expansions in the United Republic of Tanzania and in West Africa, in particular. Despite some flooding problems, crops in West Africa have benefited from abundant precipitation this year, adding to support provided to the sector as part of self-sufficiency programs. The season proved more challenging in Southern Africa, where numerous producers saw output depressed or kept below average levels due to El Niño-induced drought.

The weather anomaly also contributed to lowering production in Latin America and the Caribbean by 7 percent to 26.2 million tonnes, as it aggravated area cuts registered in numerous South American producers due to subdued prices or high production costs. Output in Argentina, Brazil, Bolivia, Guyana, Paraguay, Uruguay, Suriname and Venezuela is expected to fall as a result. Production shortfalls in these countries would more than outweigh gains in Chile, Colombia, Cuba, the Dominican Republic, Mexico and Peru, fostered by more conducive weather or attractive paddy prices.

In North America, the USDA’s latest assessments sees paddy output in the United States at its second highest on record, or 10.7 million tonnes, notwithstanding losses incurred to extensive August floods. The 23 percent year-on-year gain follows a surge in long-grain plantings, promoted by less attractive margins for competing crops. Elsewhere, area expansions and conducive weather may foster gains in the European Union and the Russian Federation, lifting production in Europe by 2 percent to 4.3 million tonnes. By contrast, in Oceania, Australia closed the season with negative results, as short water availabilities triggered a significant cut in plantings.

FAO has lowered its forecast of international trade in rice in calendar 2016 by 800 000 tonnes since July, now pointing to global rice deliveries amounting to 43.1 million tonnes. This level would stand 3 percent short of the 2015 volume, marking the second successive year of trade retrenchments. The reduction would be imputable to reduced demand in Asia, where imports have been discouraged by ample supplies on store or more restrictive policies. Deliveries to Africa are also expected to remain close to five-year lows, amid improved domestic availabilities and weak local currencies. Instead, Australia, the United States, the European Union and Latin America and the Caribbean would take-in larger volumes. On the supply side, exports by both India and Viet Nam look set to incur the steepest year-on-year reductions, as subdued demand from key outlets has tended to compound their tighter supply situations this year. Shipments by Australia, Brazil, Guyana and Myanmar are also forecast to fall, while Argentina, Cambodia, China (Mainland), Paraguay, Uruguay, United States, Pakistan and Thailand are all seen closing the year with greater exports.

FAO anticipates world trade in rice to in calendar 2017 to stage an only modest, 0.7 percent, recovery to 43.4 million tonnes. Underlying the outlook are prospects of reduced deliveries to the Far East, mirroring good production prospects for the sub-region. Easing inflationary pressure may similarly reduce demand from Latin America and the Caribbean, but more attractive international prices and the need to refurbish reserves could stimulate a somewhat livelier pace of purchases by African and Near East Asian countries next year. As for exports, improved exportable availabilities would best position India to meet the slight trade expansion anticipated for 2017, although Australia, Cambodia and Pakistan and the United States are also seen stepping up exports. By contrast, heightened competition for markets could see shipments by Argentina, Brazil, Uruguay and Thailand falter, keeping those of Viet Nam close to six-year lows.

Global rice utilization is projected to hover around 501.2 million tonnes (milled basis) in 2016/17, which is 1 percent more than the 2015/16 estimate. The increase would be sustained by a 5.0 million tonne expansion in food use to 402.5 million tonnes, much of which concentrating in Asia and Africa. As a result, global per capita food use is forecast to stage a small (0.1 kilo) advance to 54.2 kilograms per person. Quantities destined to animal feed are also expected to expand to 18.3 million tonnes, while another 80.5 million tonnes are used for other uses (seed, non-food industrial uses and post-harvest losses).

FAO has upgraded its forecast of world rice stocks at the close of 2016/17 marketing years by 4.4 million tonnes to 169.9 million tonnes (milled basis). The revised level would continue to suggest a second successive season of world stock drawdowns, although the forecast fall would be comparatively contained at 0.6 percent, or 1.0 million tonnes. This would enable world reserves to cover over 3 months of projected utilization, positioning the global stocks-to-use ratio at a still comfortable 33.3 percent in 2016/17. The five major rice exporters remain projected to drive the global stock reduction, as a group, cutting reserves by 10 percent to 30.8 million tonnes. Among the individual countries, drawdowns are expected to concern Thailand and India the most, amid expectations of continued efforts to reduce the size of state reserves. However, cuts in these two countries may be largely offset by accumulations elsewhere, especially in China (Mainland), but also in Colombia, the Republic of Korea and the United States.

International rice prices interrupted a two-year downward trajectory in May, amid a tightening of exportable availabilities in the major rice origins. This tendency lasted until August, when prospects of good harvests in the northern hemisphere and a lack of revival in import demand began to weigh on market sentiment. The FAO All Rice Price Index (2002-2004=100) shed 5 points that month and another 10 points since then to arrive at a mid-October value of 185 points. Prices eased in all the major rice market segments, but the most pronounced falls concerned the Indica market. Subdued demand for both white and parboiled supplies lowered the October value of the Higher Quality Indica Index to its lowest since October 2007, or 168 points. The Lower Quality Indica and Aromatica indices also hit multi-year lows of 181 and 152 points, respectively, as poor buying interest outweighing support provided by tight broken availabilities and prospects of reduced basmati output. Declines in medium-grain quotations were somewhat more contained, thanks to a pick-up in sales to the Far East. This positioned the Japonica Index at 217 points in mid-October, 2 percent below July levels. Looking ahead, international rice quotations could remain under downward pressure, as main-crop harvests gather pace in the northern hemisphere in the next few months. Still, much is still likely to hinge on demand-side factors. Depreciated currencies and generally adequate domestic availabilities dampen expectations of marked improvements in import demand. However, lower international offerings could encourage the return of major buyers to the market, thus attenuating seasonal pressure on quotations.

RMM October 2016

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