FAO Rice Market Monitor, October 2014, Volume XVII - Issue No. 3
The 2014 paddy season is at an advanced stage of progress, as the major producers in the Northern Hemisphere are now engaged in the harvesting of their main 2014 crops, with some also preparing the land for their 2014 secondary crops. Since the release of the RMM in July, prospects for global paddy production have worsened substantially, mostly because of erratic weather conditions, including late arrival of rains or lingering droughts, which were often followed by heavy downpours and floods. These, together with a possible manifestation of an El Niño weather anomaly in the coming months, even if a weak intensity, have led to a lower forecast for global rice production in 2014 of 744.4 million tonnes (496.4 million tonnes, milled basis), about 6.5 million tonnes less than predicted in July. Under current expectations, global paddy production would be marginally (0.4 percent) lower than the 2013 estimate, marking a third year of below trend growth.
The disappointing 2014 season results would mostly be linked to the poor performance of crops in Asia, where production is now forecast to fall by close to 5 million tonnes, or 0.7 percent. If confirmed, this would be the first contraction (albeit modest) registered by the region since 2009. Much of it would be associated with a 2.4 percent decline in India, following an irregular pattern of the monsoon. Unfavourable weather conditions are also expected to result in falling output in Indonesia, Cambodia, Nepal, Pakistan, the Philippines, Sri Lanka and Thailand. In the case of Thailand, the decline would also be associated with the February 2014 abolition of the rice pledging scheme, which had guaranteed high prices to farmers since 2011. Although adverse climatic conditions also affected crops in Bangladesh and China, prospects for output in those countries still indicate an increase from last year. On the other hand, favourable growing conditions are anticipated to underpin production in Viet Nam, despite a small, price and policy-driven, reduction in plantings. In Africa, expectations for the season also deteriorated over the past three months, mainly on less optimistic prospects over crops in Madagascar, but also in Egypt and in western African countries. Paddy production in the region is now foreseen to reach 27.6 million tonnes, barely 1 percent more than in 2013, mostly sustained by the recovery in Madagascar. The outlook remains positive for crops in Eastern African countries, but points to a stagnation of output in Western Africa, amid late and poorly distributed rains, and to an area-led contraction in Egypt. Prospects for crops in Latin America the Caribbean have, likewise, been scaled back since the last issue of the report, mainly on account of Colombia, Ecuador and Venezuela. The region’s aggregate paddy production is nonetheless set to increase by a modest 0.6 percent to 28.3 million tonnes. Gains in Brazil, Guyana and Paraguay would largely support the expansion, more than making up for declines in Colombia, Ecuador, Peru, Uruguay and Venezuela and in the central part of the continent, where severe water deficits crippled crops. The 2014 season in Europe is expected to progress by 2.8 percent to 4.1 million tonnes, supported by a strong recovery in the Russian Federation and a small rise in the EU. In North America, the United States’ downward revision of plantings curbed the production forecast for the country 9.9 million tonnes, which would nonetheless represent a 15 percent recovery from 2013. In Oceania, the 2014 crop harvested by Australia in the first quarter of the year, although slightly upgraded, is estimated to have fallen 28 percent short of the 2013 excellent outcome, as insufficient water for irrigation constrained plantings.
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Strong import demand, combined with ample supplies held by major exporting countries, is expected to boost world rice trade in 2014 by 7 percent to a 39.7 million tonne record. Imports are predicted to increase in all major geographical regions, especially Asia, where important buyers, such as Bangladesh, Indonesia, the Philippines and Sri Lanka, face the need to reconstitute reserves and to lower food inflation. Among exporters, Thailand is expected to meet much of the trade expansion, largely at the expense of India, which, nonetheless, may retain its position as the prime exporter. The return of competitively priced Thai supplies is also envisaged to negatively impact deliveries by Viet Nam. Australia, China (Mainland), Ecuador, the United States, the Russian Federation and Uruguay are also forecast to export less in 2014.
Despite the disappointing 2014 production outlooks, world rice trade in 2015 is currently forecast to be only 0.7 percent higher year-on-year, at about 40 million tonnes. Indeed, while the relatively poor results of the season would require several countries to step up imports in calendar 2015, part of the production shortfalls is likely to be filled by drawing supplies from national reserves. African countries, especially Cote D’Ivoire, Nigeria and Senegal, would contribute most to the increase in world imports. Although purchases by Asian nations are anticipated to stay high, amid output setbacks and lingering pressure on domestic prices, they may retreat somewhat compared with 2014, on reduced demand by Indonesia, the Philippines and Sri Lanka. In Latin America and the Caribbean, weather induced losses are expected to keep demand firm, which would contrast with import cuts in North America, namely the United States, and largely stable requirements in Europe. Among exporters, Thailand is predicted to expand deliveries further in 2015, re-establishing its position as the world’s leading supplier of rice. Shipments from Australia, Cambodia, China (Mainland), Myanmar, Pakistan, the United States and Viet Nam are also anticipated to end above their 2014 levels. On the other hand, the poor 2014 production performance and larger domestic requirements may curb exports by India further over the course of 2015.
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FAO has lowered its forecast of world rice utilization in 2014/15 by 2.0 million tonnes to 500.3 million tonnes (milled basis). Nonetheless, the revised figure continues to suggest a 1.7 percent expansion in global rice utilization, largely on account of a 5.2 million tonne increase in world food use, which would support a small gain on a per caput basis to 57.5 kg in 2014/15. Quantities destined to seed, non-industrial uses and post-harvest losses are also set to rise.
FAO currently forecasts global rice carryovers in 2015 at 177.7 million tonnes (milled basis), which is some 2.0 million tonnes less than reported in the July issue of the RMM. The revision mainly mirrors expectations of sharper draw-downs in India, due to the deteriorated production outlook for the country, and in Thailand, based on more buoyant export prospects. At 177.7 million tonnes, world rice inventories in 2015 would stand 2 percent below the historical highs recorded in 2014, marking the first world carry-over contraction to occur in a decade. Taking into account projected utilization levels, this would position the global stocks-to-use ratio at 34.8 percent in 2014/15, down from an estimated 36.3 percent a year earlier, but higher than a five-year average of 33.3 percent. Reflecting expectations of sizeable draw downs in India and Thailand, the five major rice exporters are expected to trim their inventories by 8 percent to 44.6 million tonnes in 2015, resulting in the stock-to-disappearance ratio dipping from 27.7 percent in 2013/14 to 25.1 percent in 2014/15.
Following two months of steady gains, the FAO All Rice Price Index (2002-2004=100) rose by 1 percent in August to an average of 242 points, underpinned by seasonal tightness and strong import demand. This was particularly the case in the Indica and Aromatica segments, which accounted for all of the month’s strengthening, while the Japonica Index stabilized around a high value of 263 points. The price firmness was sustained until September, when newly harvested crops tended to weigh on Indica quotations. Looking ahead, international rice prices could come under increasing downward pressure from the progress of main-crop harvests in northern hemisphere countries. Indeed, concerns that lower production in India, Pakistan and Thailand, will be supportive of international quotations are attenuated by prospects of still above-average harvests in these countries, as well as abundant inventories amassed through years of uninterrupted output gains. Against this backdrop, policies will continue playing a particularly influential role, especially those concerning the disposal of stocks in key global suppliers.