World rice production is expected to increase in 2008 by 12 million metric tons or 1.8 percent, assuming normal weather conditions, the United Nations’ Food and Agriculture Organization said in its first forecast of the new year.

Production increases would ease the current very tight supply situation in key rice producing countries. International rice trade is expected to decrease, mainly due to restrictions in main exporting countries.

Sizable production increases are expected in all the major Asian rice producing countries, including Bangladesh, China, India, Indonesia, Myanmar, the Philippines and Thailand, where supply and demand are currently stretched. Governments in these countries have already announced a series of incentives to raise production.

The production outlook is also positive in Africa, where high world prices may sustain a 2 percent growth, particularly in Egypt, Guinea, Nigeria and Sierra Leone. Concerns about food import dependency in the region have led to a mobilization of resources towards the rice sector.

Production is expected to recover strongly in Latin America. Rice production in the European Union is also expected to rise while it may contract in Japan, one of the few countries where producer prices fell last year.

FAO forecasts dismal rice production for Australia, reflecting extremely low water availability. A reduced crop is also expected in the United States, mainly as a result of a cut in area caused by mounting competition from more profitable crops.

“The international rice market is currently facing a particularly difficult situation with demand outstripping supply and substantial price increases,” said FAO senior economist Concepcion Calpe. “Higher rice production in 2008 could reduce the pressure, but short-term volatility will probably continue, given the very limited supplies available from stocks. This implies that the market may react very strongly to any good or bad news about crops or policies,” she added.

According to the latest FAO estimates, paddy production rose by 1 percent in 2007 to 650 million metric tons, which would be a second consecutive year where production growth fell short of population growth, resulting in a drop of rice production on a per capita basis.

International trade in rice in 2008 is projected at 29.9 million metric tons, 1.1 million metric tons lower than the revised 2007 trade estimate. The very tight supply situations that most exporting countries may face until the last quarter of the year and the associated restrictions on exports are behind the anticipated drop of rice trade in 2008.

The traditional rice exporting countries of China, India, Egypt, Vietnam and Cambodia, have either imposed minimum export prices, export taxes or export quotas or bans. Such moves are expected to reduce rice exported from these countries. As for imports, the drop reflects prospects of lower shipments to Bangladesh, Indonesia and the Iran, as supply and demand situation in those countries may ease somewhat compared with last year.

Since January, international rice prices have seen a steep increase of about 20 percent. For example, in March 2008 the high quality Thai 100 percent B was quoted at $546 per metric ton, up 13 percent compared to February and 68 percent higher than in March 2007.

Recent sudden price rises reflect very limited supplies available for sale, especially given the wide range of restrictions imposed by key major exporting countries. The tendency for further price rises, however, may diminish somewhat in the next few months with the arrival of new rice harvests in Brazil, Uruguay, Bangladesh, India, Indonesia, Thailand and Vietnam. “So far, prospects regarding these crops are positive,” Calpe said.