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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, April 2018, Volume XXI - Issue No. 1

Release date: 27 April 2018

ROUND-UP

The 2017 season is soon ending with offseason harvests in northern hemisphere countries about to be completed. Since December, FAO has raised its forecast of world paddy production in 2017 by 2.9 million tonnes to 759.6 million tonnes (503.9 million tonnes, milled basis). At that level, global production would exceed the 2016 record by a modest 0.6 percent, or 4.5 million tonnes. Indeed, various Asian countries saw cropping activities disrupted by floods or drought during their main-crop cycles. Although in a few cases more normal growing conditions allowed secondary crops to compensate for initial shortfalls, these weather setbacks are likely to result in Asian production posting an only small (0.7 percent) annual increase to 686.7 million tonnes. The 2017 season progressed more favourably in Latin America and the Caribbean, where conducive weather boosted yields to all-time records, resulting in a 7 percent output recovery to 28.0 million tonnes. In Australia, farmers also reacted to positive margins and a comfortable water supply situation by trebling plantings. Conversely, prospects of reduced margins and adverse weather lowered production in Europe and, especially, the United States, which gathered its smallest crop in 21 years. Although higher than last reported, paddy production in Africa is now also seen below the 2016 all-time high at 32.1 million tonnes, as erratic rains depressed output in eastern and southern parts of the continent, offsetting gains in Egypt and West Africa.

Meanwhile, 2018 main crops have reached the harvesting stage along and south of the Equator, while most northern hemisphere producers are awaiting the May/June arrival of the rains to launch planting operations. Although precipitation patterns during the northern hemisphere summer will play a critical role in determining the final size of crops, assuming normal growing conditions, FAO’s first forecast of world paddy production in 2018 sees global output staging a 10.3 million tonne annual expansion to a new high of 769.9 million tonnes (510.6 million tonnes, milled basis).  The forecast 1.4 percent growth is envisaged to be area-driven, coming in response to improvements to producer prices and ongoing state support. This would be namely the case in Asia, where paddy plantings are seen regaining momentum next season. Within the region, the largest absolute output increase is anticipated to concern India, although early prospects also point to sizeable production rebounds in Bangladesh, Sri Lanka and Viet Nam along with gains in Indonesia, the Lao People's Democratic Republic, Malaysia, Myanmar, Nepal, the Philippines and Thailand. Combined, these would more than offset a sizeable reduction in China (Mainland), where officials have intensified their efforts to avoid excess supplies by encouraging plantings cuts, and in Afghanistan, the Republic of Korea and the Islamic Republic of Iran.

The production outlook is likewise positive for Africa. Despite lingering concerns over Fall Armyworm infestations, as well as a somewhat uneven geographical distribution of the rains, growing conditions in eastern and southern parts of the continent have been generally more conducive than in 2017. Ensuing output recoveries in the two sub-regions, along with further inroads in Western Africa, could more than compensate for a forecast shortfall in Egypt, where competition with other crops and official steps to conserve scarce water resources are set to intensify in 2018. In the United States, improved margins look set to return 2018 production to more normal levels, while crops in Australia are seen little varied year-to-year. Instead, Latin America and the Caribbean and Europe look headed towards output contractions, as prospects of reduced remuneration and weather vagaries are set to depress production in Argentina, Brazil, Bolivia, Colombia, the European Union, Ecuador, Uruguay, the Russian Federation and Venezuela, outweighing anticipated increases in Cuba, Chile, the Dominican Republic, Peru, Guyana and Paraguay.

Following a 1.8 million tonne upward revision since December, international rice trade in calendar 2018 is now pegged at 47.6 million tonnes. This level would be just 1 percent short of the 2017 all-time high, now estimated at 48.1 million tonnes. From a regional perspective, higher international prices and ample inventories amassed through good crops or large 2017 imports are anticipated to dampen import demand in Africa and Latin America and the Caribbean. However, import reductions in these regions stand against prospects of Asian purchases growing to their second highest on record, as important Asian buyers, namely the Indonesia and the Philippines, recur to international purchases to replenish inventories and quell pressure on local quotations. Import demand is also forecast to remain comparatively firm in the United States and in Europe. Among suppliers, the largest annual export reduction is envisaged to concern Thailand, which could see its competitive edge eroded by tighter availabilities and a strong local currency. Nonetheless, exports by India could also ease somewhat, amid ebbing demand from its traditional buyers. Production shortfalls are likewise predicted to undermine exports by Argentina, the United States and Uruguay, while Australia, Brazil, Cambodia, China (Mainland), Ecuador, Guyana, Myanmar, Pakistan, Paraguay and Viet Nam are all set to export more.

World rice utilization is predicted to expand by 1.1 percent in 2017/18 to 503.9 million tonnes (milled basis). A 1.3 percent increase in food use to 405.8 million tonnes would underpin this growth, while combined volumes destined for other uses, including feed, seeds, industrial uses and post-harvest losses, remain little varied from the previous year. FAO’s first forecast sees world rice utilization expanding by an additional 5.2 million tonnes in 2018/19 to reach 509.1 million tonnes. Food use is again predicted to drive this growth, overshadowing declines in feed and industrial uses. Taking population growth into account, global per capita food consumption would pass from 53.7 kilos in 2017/18 to 53.9 kilos next season.

Global rice inventories at the close of 2017/18 marketing seasons are set to rise by 1.1 percent to 170.9 million (milled basis). China (Mainland) is still expected to account for much of this growth, although, among importers, carry-overs are also seen staging sizeable recoveries in Bangladesh and Brazil, more than compensating for drawdowns in Indonesia, the Republic of Korea, Saudi Arabia, Sri Lanka and the United Republic of Tanzania. By contrast, reserves held by the five major exporters are forecast to contract for the fourth successive season, much as a result of cuts in Thailand associated with the release of supplies from state stockpiles and a sharp output reduction in the United States. Meanwhile, preliminary prospects point to global rice production exceeding utilization in the forthcoming season. Thus, global rice reserves at the close of 2018/19marketing years look headed towards their third successive increase, reaching 172.9 million tonnes. This level would stand 1.2 percent above 2017/18 expectations, being sufficient to keep the world stock-to-use ratio at a comfortable 33.5 percent.

Barring a few months of stability, international rice prices have made steady inroads since late 2016. This tendency has continued unabated in 2018, as reflected by the FAO All Rice Price Index (2002-2004=100) increasing by 4 percent since December to reach a mid-April level of 229 points, its highest since November 2014. Among the major rice market segments, the most pronounced gains have concerned prices of lower and higher quality Indica rice. Based on their respective indices, these have strengthened by 8 to 10 percent since December, amid upbeat demand from Asian buyers, as well as tight broken availabilities in Thailand. Shortfalls in Thai fragrant production have also sustained a 2 percent advance of the Aromatic Index to 221 points, while gains were limited to around 1 percent in the Japonica market, where demand remained confined to a few regular Far Eastern buyers. From an annual perspective, the FAO All Rice Price Index averaged 227 points between January and April 2018, up 17 percent from its corresponding level a year earlier, reflecting price increases across all the major origins and qualities.

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