FAO Rice Market Monitor, April 2015, Volume XVIII - Issue No. 1
The 2014 paddy season is virtually concluded. Although the dreaded effects of an El Niño weather event failed to materialize so far, the campaign was marred by various climatic setbacks, which were mostly behind an anticipated 0.5 percent contraction in 2014 world paddy production to 741.3 million tonnes (494.4 million tonnes, milled basis), 3.3 million tonnes less than anticipated last December. Although small, the seasonal decline stands out as the first registered since 2009, another campaign marked by weather anomalies. Particularly affected were a number of Asian countries (India, Thailand and Sri Lanka, in particular, but also Cambodia, the Democratic People's Republic of Korea, Indonesia, Nepal and Pakistan), which endured late and insufficient rains and/or floods. The 2014 season also ended negatively in Oceania, where Australia faced water supply limitations. The campaign unfolded more favourably in the other regions, helping the global season to close with an above-average production outturn, notwithstanding the decline from the excellent 2013 output. Although the lack of growth in 2014 is to be attributed principally to natural events, a lingering tendency for prices to fall also played a role. Indeed, weakening world quotations made it more difficult for a number of governments to bear the burden of bulging stock holdings and to sidestep concerns over the negative environment impacts of paddy cultivation. As a result, several countries, especially in Asia, have recently engaged in less expansionary paddy production policies, for instance through the freezing of official rice producer prices or the imposition of more stringent rice cultivation limits. At the same time, however, the pursuance of self-sufficiency remains a mainstay of policies, especially in Asian importing countries.
Against this backdrop, FAO’s first forecast sees global paddy production in 2015 recovering by a modest 1.1 percent to 749.8 million tonnes (499.9 million tonnes, milled basis). The prospect is highly tentative at this stage, since, although along and south of the equator, the main 2015 crops are already being harvested, in the northern hemisphere, where the bulk of rice is produced, many countries will only start sowing their 2015 crops in May/June. This especially concerns Asia, where the progress of the monsoon will prove critical in determining whether the area and yield losses incurred in 2014 will be recuperated. Assuming growing conditions normalize, the region is predicted to drive the 2015 global expansion, with sizable gains expected in India, Indonesia, Philippines, Sri Lanka and Thailand, that would more than compensate for anticipated contractions in Bangladesh, the Chinese Province of Taiwan, the Republic of Korea, Pakistan and Viet Nam. Outside of Asia, early prospects for Africa point to some output increases arising from improved weather conditions and/or strong prices. In Eastern and Southern parts of the continent, growing conditions have so far been favourable, despite some floods and storms, with sizeable output gains anticipated in Madagascar, Tanzania and Uganda. The production outlook is also positive for West Africa, assuming more normal growing conditions, while a dull market situation may foster another decline of output in Egypt. Moderate output gains are also anticipated in Europe, sustained by attractive Japonica prices in the EU and the Russian Federation, and in Latin America and the Caribbean, in spite of unseasonal weather and tight profit margins. The increase would likely stem from gains in Bolivia, Colombia, Ecuador and Peru while output is seen falling in Argentina, Uruguay and Venezuela, and stagnating in Brazil. In North America, the USDA forecasts a small contraction of output in the United States, reflecting a prolonged drought in California and weak price prospects. Output in Australia is also poised to contract in 2015, given recurring water availability constraints.
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Following the release of consolidated custom data for the full calendar year, FAO’s estimate of world rice trade in 2014 has undergone a considerable 2.2 million tonne upward revision since December, with international flows now gauged to have grown by 14 percent from 2013 to a new record of 42.4 million tonnes (milled basis). On the demand side, the heightened 2014 import estimates mostly concerned Far Eastern countries, which emerged as the prime drivers of 2014 import growth, with Bangladesh, China (Mainland), Indonesia, Malaysia, the Philippines and Sri Lanka all gauged to have let in much larger volumes than in 2013. Revised import estimates also show imports to have increased since 2013 in a number of African countries, especially Guinea, Kenya, Mozambique, Nigeria and Senegal, while inflows to Burkina Faso, Cote d’Ivoire, Ghana and South Africa are estimated to have fallen compared to 2013. On the export side, the largest upward revision concerned India, now assessed to have retained its prime position among world suppliers, shipping an unprecedented 11.3 million tonnes, or 7 percent more than in 2013. More competitive prices boosted 2014 exports by Thailand even more than previously expected, with deliveries from country expanding by 66 percent year-on-year to a new high of 11.0 million tonnes. Revised figures also show an 18 percent increase of exports by Pakistan. By contrast, Argentina and Viet Nam shipped less than foreseen last December, with these countries, along with Australia, Cambodia, China (Mainland) and the United States, delivering less rice on the international arena than in 2013.
FAO’s forecast of international trade in calendar 2015 has also been upgraded to 41.3 million tonnes since December, a level now standing 2 percent short of the 2014 record. Underlying the forecast contraction in world imports are expectations of reduced deliveries to Asia, in particular to Far Eastern countries, where many important buyers now appear well placed to cut imports, either due to refurbished stockpiles from large purchases in 2014 or as a result of production gains. Although these same factors, combined with currency depreciations, are anticipated to constrain purchases by West African countries, overall deliveries to Africa are likely to change little, owing to a firm demand from Eastern and Southern African buyers. Poor harvest results are instead predicted to sustain a further increase in imports by Latin America and the Caribbean, with demand in Europe also holding strong, while it abates in the United States. Among exporters, much of the global trade contraction this year could be shouldered by India, a result of more limited export availabilities. Very competitive prices, however, are likely to keep Indian exports well above pre-2011 levels. Supply constraints are also behind lower expected sales by Argentina, Australia, Brazil and Uruguay. Although Thailand harvested less rice in 2014, continued sales from government granaries are expected to keep the country’s exports rising. Sales by the United States are also expected to rebound, facilitated by falling export quotations in the aftermath of a good 2014 harvest. Cambodia, China (Mainland), the European Union, Myanmar, Pakistan, Paraguay and Russian Federation are similarly forecast to export more in 2015, while consignments by Viet Nam are expected to remain subdued for a third consecutive season.
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Consistent with reductions to 2014 production figures, FAO’s forecast of world rice utilization in 2014/15 has been lowered to 499.4 million tonnes (milled basis), which is 1.7 percent, or 8.2 million tonnes, more than the estimate for 2013/14. The forecast growth mostly mirrors expectations of 1.3 percent progress in world food consumption to 414.6 million tonnes, a level that would support a small, 0.2 percent, increase in average per caput food intake to 57.4 kilos. Based on FAO’s first outlook, global rice utilization in 2015/16 could increase to 505.7 million tonnes, again sustained by expanding food consumption to 419.8 million tonnes.
World rice carry-over stocks at the close of seasons ending in 2015 are now predicted to fall 2.4 percent short of their opening level to 176.6 million tonnes, marking the first world stock contraction to occur in a decade. The five major rice exporters (India, Thailand, Viet Nam, Pakistan and the United States) are likely to account for most of the global stock draw-down, cutting their inventories by 5.7 million tonnes to 41.4 million tonnes. This level would bring their stock-to-disappearance ratio to its lowest since 2010, at 23.4 percent. Individually, India is predicted to incur the largest off-load. On the other hand, FAO’s first forecast of rice stocks at the close of marketing seasons ending in 2016 has been set at 171.0 million tonnes, implying that global rice utilization is likely to surpass production for the second consecutive year. The expected 5.6 million tonne annual stock drawdown would position the global stocks-to-use ratio at 33.2 percent, down from 34.9 percent in 2015, but still sufficient to cover 4.1 months of projected world rice consumption.
International rice prices, have fallen steadily since September 2014, a tendency that has resulted in the FAO All Rice Price Index (2002-2004=100) hitting a four-and-a-half year low of 219 points in March 2015. Much of the weakness recorded since December concentrated in the Japonica market, where, in spite of tighter availabilities, prices were depressed by limited buying interest. Nevertheless, weak sentiment continued to prevail over the long-grain segment, where ample supplies at hand, coupled with intense competition for markets, resulted in the High and Low Quality Indica Indices shedding 3 and 2 percent since December to 189 and 187 points, respectively. The fragrant segment has stood out as the only exception to this downward tendency, with the Aromatic index regaining 4 percent of its value, relative to the seven-year low touched in December 2014. From an annual perspective, the January-March value of the Index stands 6 percent below year-earlier levels, with the decline mirroring the easing of fragrant quotations, as well as softer Indica prices.