FAO Rice Market Monitor, July 2016, Volume XIX - Issue No. 2
The 2016 season is well advanced along and south of the equator, where producers have already collected the main-crop and are now busy cultivating their offseason crops. In the northern hemisphere, the main paddy crops have only just been planted or are in the process of being planted. Although much will depend on growing conditions in the months ahead, based on current weather and planting indications, FAO has raised its forecast of world paddy production in 2016 by 1.3 million tonnes to 746.8 million tonnes (496.0 million tonnes, milled basis). The revision primarily stems from improved crop prospects in India, the Lao People’s Democratic Republic, Pakistan and the United States. The outlook was also upgraded for Egypt, the United Republic of Tanzania and Colombia, but was downscaled for Bangladesh, Brazil, China (Mainland), Nicaragua and Sri Lanka.
At 746.9 million tonnes (496.0 million tonnes, milled basis), world paddy production would stand 8.1 million tonnes, or 1.1 percent, over the 2015 depressed level. Much of the expected growth is forecast to stem from more conducive weather conditions, which could foster a recovery in area under paddy. This is especially expected to be the case of Asia, where production may stage a 7.6 million tonne upturn to 675.6 million tonnes, as the dissipation of the El Niño anomaly in May raises prospects of more normal rains, after crops in the region were beset by weak rainfall for two successive years. This is even more so as climate forecasts point to a 75 percent likelihood that the anomaly will be followed by a La Niña event. If confirmed, this could boost rainfall performance over parts of Asia even further, providing greater scope for reservoirs to be replenished in time for secondary crop plantings. At a country level, India would be responsible for much of Asia’s production upturn, with sizeable gains also expected in China (Mainland), the Philippines and Thailand. Although more contained, increases are also forecast for 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 and Nepal. By contrast, production is anticipated to decline in Bangladesh, Indonesia, the Republic of Korea, Malaysia, Sri Lanka and Viet Nam, due to un-remunerative prices or unseasonable weather.
Outside of Asia, paddy output in Africa is seen expanding by 3 percent in 2016 and approaching the 30.0 million tonne mark. Much of the region’s growth is expected to rest on larger crops in Egypt and West Africa, sustained in Egypt by good price prospects and in the sub-region by sustained assistance from governments. Modest gains are also anticipated in Eastern Africa, where crops benefited from abundant rains. In Southern Africa, various countries that were negatively impacted by belated and weak rainfall early in the season are likely to face a decline in output. In North America, the United States is heading towards a record harvest, as poor price prospects for competing crops and easing drought in California and Texas boosted plantings.
Paddy production is also expected to make some inroads in Europe, while it may fall to a six-year low of 25.7 million tonnes in Latin America and the Caribbean. The deteriorated outlook for the region is mostly imputable to Brazil, but with poor growing conditions, in the form of excess precipitation or drought compounding on prospects of diminished returns, Argentina, Bolivia, Guyana, Paraguay, Suriname, Uruguay and Venezuela could all see output contract. In Oceania, continued constraints in the supply of water for irrigation also triggered a slump in production in Australia.
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Since April, FAO has lowered its forecast of world rice trade in calendar 2016 by 1.0 million tonnes to 43.9 million tonnes. On the import side, the Philippines accounts for much of the revision, although a slow pace of purchases also warranted cuts for Bangladesh, the Islamic Republic of Iran, Nigeria and South Africa. Combined, these more than offset all upward import revisions, the largest of which concerned China (Mainland) and the Lao People’s Democratic Republic. On the supply side, these adjustments were mainly met by lowering exports from Viet Nam, although possible contractions of demand from key buyers also called for curbing deliveries from India and Cambodia.
The revised forecast of 43.9 million tonnes for 2016 stands 1 percent, or 650 000 tonnes, short of the 2015 level, suggesting a second successive year of contraction in world rice trade. Much of the projected fall would reflect import reductions in the Far East, where key buyers such as Bangladesh, China (Mainland), the Philippines and Sri Lanka may lower their purchases amid ample availabilities on store and/or increased border protection. Against a backdrop of good local harvests and lingering weak currencies, imports by Africa are also set to stagnate close to 2015 lows. By contrast, supply shortfalls and high local quotations could lift consignments to Latin America and the Caribbean to new heights, with strong local demand also underpinning imports by Europe for a fourth successive year. Among the exporters, India remains forecast to incur the largest annual drop, although a poor seasonal outturn and subdued demand from key buyers are also expected to curb shipments by Viet Nam. Exports by Australia, the United States, Guyana, and the European Union could similarly fall, while large carry-ins may enable Argentina, Pakistan, Paraguay, and Uruguay to increase sales and Thailand to hold them broadly steady.
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Global rice utilization is forecast to expand by 1.5 percent in 2016/17 to 502.9 million tonnes. Growing food intake would account for much of this growth, rising 5.2 million tonnes over the year to 403.9 million tonnes. This level would be sufficient to support a 0.1 kilo advance in world per capita food consumption to 54.3 kilos. Volumes destined to feed and other uses (including seeds, non-food industrial and post-harvest losses) are similarly expected to rise to 18.2 million and 80.9 million tonnes, respectively. Official initiatives to dispose of surplus produce in the Far East, especially Japan, the Republic of Korea and Thailand, would sustain much of the increase in feed and industrial uses foreseen for 2016/17.
With global rice utilisation forecast to outpace production for the second consecutive year, world rice inventories at the close of 2016/17 are anticipated to fall 4.0 million tonnes below their opening level to 165.5 million tonnes. This would result in the world stocks-to-use ratio passing from 33.7 percent in 2015/16 to 32.3 percent in 2016/17. Drawdowns are expected to be most pronounced in the major rice exporters, in particular India and Thailand, given sustained efforts to trim government reserves. Out of the five major exporters, only the United States is anticipated to face a build-up, resulting in the groups’ stock-to-disappearance ratio falling to its lowest level since 2007/2008, or 15.5 percent. Among importers, Bangladesh, Indonesia, Japan and Nigeria may also close the season with smaller inventories, but part of these falls would be compensated by accumulations in China (Mainland), Colombia, Cuba, the European Union, the Republic of Korea and the Philippines.
The weak sentiment that dominated the international rice market since late 2014 came to abrupt halt in May 2016, when international rice quotations reacted to prospects of short export availabilities in the major origins. The FAO All Rice Price Index (2002-2004=100) rose by 3 points that month and has hovered around 199-200 points since then. The strengthening mostly resulted from a firming of Indica quotations, as reflected in a 7 percent increase in the Higher Quality Indica Index to 193 points and a 9 percent rise in the Lower Quality Indica Index to 199 points. Reflecting a brisk pace of sales, the Aromatica Index also recovered, rising by 16 percent to a mid-July value of 166 points. This contrasted with developments in the medium-grain market, where a combination of ample availabilities and tepid buying interest drove the Japonica Index 19 points below its March level, to 223 points.