FAO Rice Market Monitor, April 2014, Volume XVII - Issue No. 1
With the 2013 season about to be concluded, several countries have heightened their 2013 production estimates above those reported in November. They included China (Mainland), India, Pakistan and the Philippines, which had endured a number of climatic setbacks, but where damage to crops was reckoned to have been less severe than previously foreshadowed. Prospects also improved for Colombia, Indonesia, the Islamic Republic of Iran, Japan, Nepal, Sri Lanka, Tanzania and Thailand, while they deteriorated for Cambodia, the Lao People's Democratic Republic, Myanmar and Russia.
Overall, the revisions translated into a 3.5 million tonne upgrade of 2013 global paddy rice production to 744.9 million tonnes (496.6 million tonnes, milled basis), which would entail a relatively low 1.1 percent increase from the previous season. The relatively modest performance of the rice sector over the season was the result of climatic problems witnessed by several important producers in Asia, including China, Laos and Malaysia, where production fell. On the other hand, most of the other countries in the region harvested larger crops, with sizeable increases expected in India, Indonesia and Pakistan. In Africa, strong production gains in the western and eastern parts of the continent were offset by a contraction in Madagascar, where output was depressed by erratic weather and pests. In the rest of the world, more favourable growing conditions boosted crops in Australia and in Latin America and the Caribbean, while poor price prospects at planting time trimmed output in the United States and in Europe.
This is the time of the year when market attention is turning to the forthcoming season's crops, some of which are already approaching the harvesting stage. According to the FAO first forecast, global paddy production in 2014 could reach 751.0 million tonnes (500.7 million tonnes, milled basis), 0.8 percent more than currently estimated for 2013 and a third consecutive season of subdued growth. Much of the predicted slowdown rests on expectations of an El Niño recurring in mid-2014. Being associated with drought in Asia, the hub of rice production, the event may have a strong impact on yields, besides fostering a shift of planting towards less water demanding crops during the dry season. South of and along the equator, where the paddy campaign is more advanced, sizeable increases in output are expected in South America, while drought conditions have hindered crops in Australia. Elsewhere, early expectations point to output rebounding in Africa, North America and Europe.
FAO has slightly lowered its November estimate of international rice trade in calendar 2013, which now stands at 37.3 million tonnes, about 3 percent (1.0 million tonnes) less than the 2012 record. Much of the year-to-year reduction in world imports was caused by a marked retreat of Indonesia and the Philippines from the market, following bumper crops. Nigeria and China, the most important rice destinations, also cut imports, albeit slightly, while inflows to the Islamic Republic of Iran, the Republic of Korea and Madagascar are estimated to have risen compared to 2012. As for exports, much of the brunt of the trade contraction was borne by Viet Nam, whose official exports were reported to have fallen by 1 million tonnes, consistent with the reduced purchases by Indonesia and the Philippines, two of Viet Nam’s most important buyers. More contained reductions were experienced by Brazil, Myanmar, Thailand and Uruguay, a consequence of high domestic prices. By contrast, Cambodia, China, India and Pakistan managed to step up their sales abroad.
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International trade in rice in 2014 is forecast to recover by 5 percent to 39.3 million tonnes, 1.0 million tonnes higher than foreseen in November and a new high. Faced with rising domestic prices and a thinning of reserves, Asian countries (Bangladesh, China, Indonesia, Malaysia, Nepal, the Philippines and Sri Lanka) would be responsible for much of the 2.0 million tonne expected increase in world imports. However, rice flows to countries in Africa are also anticipated to edge higher, mainly on larger purchases by Nigeria, Mali and Tanzania, as deliveries to Madagascar and Mozambique are forecast to be cut. Imports by countries in Latin America and the Caribbean may also rise, supported by larger inflows to Haiti and Bolivia, while those directed to Brazil may decline. On the supply side, ample availabilities in exporting countries, following large harvests and inventories, are intensifying competition for markets. Amid sustained efforts to curb its public inventories, Thailand is expected to capture much of the expansion in world demand, although most of the other rice exporters (Argentina, Brazil, Cambodia, China, Egypt, Guyana, Pakistan, Paraguay, the United States and Viet Nam) are also forecast to export more. Larger deliveries by these countries would come at the expense of reduced exports by India, which may, nonetheless, retain its number one position among exporters.
Consistent with the more positive outlook for 2013 crops, since November FAO has lifted its forecast of global rice utilization in 2013-2014 by 1.0 million tonnes to 490.3 million tonnes (milled basis), or 2.5 percent above the previous year. Much of the season’s consumption growth would be sustained by a continuing rise in direct human consumption, but larger amounts are also forecast to be destined to animal feed and other uses. Still tentative and based on early expectations over 2014 production, FAO sees global rice utilization 2014-15 expanding further and reaching 502.0 million tonnes. Food intake is again expected to drive much of the growth, absorbing 83 percent of anticipated total use. Taking into account a projected 1.4 percent increase in world population, the average rice per caput food intake would rise marginally above the 2013-14 estimate of 56.9 kilos, to 57.0 kilos. Indeed, rice remains expensive in domestic markets, with many countries reporting lingering increases in local prices.
Based on the latest estimates, global rice stocks carried over in 2014 are set to rise for the ninth consecutive year, reaching 180.5 million tonnes (milled basis), 1.5 million tonnes more than foreseen in November, and 3.2 percent above their opening level. Developing countries would be responsible for all of the stockpile, amassing 3 percent more, largely sustained by an increase in China. By contrast, much as a result of poor production results, carryovers in developed nations could fall by 3 percent. Overall, the five major rice exporters are also expected to build up their reserves, owing to larger inventories in Pakistan, Thailand and Viet Nam, which would compensate for a drawdown in India and the United States. As a result of these changes, the world stock-to-use ratio, a key indicator of food security, is predicted to rise from 35.7 percent in 2012-13 to 35.9 percent in 2013-14. As for the five major exporters’ stock-to-disappearance ratio, an indicator of the expected international market tightness, current forecasts point to a decline from 28.0 percent to 27.8 percent over the same period. Although still very preliminary and based on current prospects for production, trade and utilization, global rice stocks carried over in 2015 are forecast to be trimmed for the first time in ten years, albeit by only 0.5 percent.
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International rice prices have followed diverging trends in the past four months. Prices in the medium grain segment rose sharply amid prospects of diminished availabilities in the United States and Australia, the major Japonica suppliers, and continued export restraints in Egypt. This strength contrasted sharply with the weakness dominating the long-grain segment since early 2013. Indeed, reflecting the ample availabilities in the hands of major exporters, as well lukewarm buying interest, the high and low quality Indica sub-indices have continued to fall, retreating by 2-3 percent from November. Aromatic rice prices also edged lower, albeit less markedly, reflecting more ample supplies and a retreat of important buyers from the market, with the fragrant sub-index shedding 1 percent since November.
International rice export prices in the next few months are likely to be influenced by the progress of secondary crop harvests in northern hemisphere countries and of 2014 main crops along and south of the Equator. Given expectations of an overall ample supply in major exporting countries, these harvests could exert additional pressure on export quotations. Against this backdrop, buying decisions will play an important role. The Government of the Philippines has already announced plans to conduct an import tender in April, but the return of other important buyers could further attenuate the pressure for prices to fall. Looking forward, climatic events affecting the development of 2014 season crops, such as the potential El Niño event, are also likely to influence market sentiment. On the policy front, decisions in Thailand concerning Government support to the rice sector will hold particular sway, as will the pace with which officials continue the disposal of public stocks. The review of milled rice export restrictions by officials in Egypt will also need to be watched, as Egypt’s return to the market could ease some of the on-going upward pressure on Japonica prices. Finally, as witnessed in recent months, movements of exchange rates could also very much influence prices in the various origins.