Global rice production and consumption are in balance and per capita use of rice is drifting down with higher incomes around the world and changing eating habits. But almost every other factor underpinning the global price outlook for rice is out of sorts, including ending stocks, trade balance, the value of the dollar, production costs and whatever the heck China is doing. The result is the highest rice prices in some time.
While the world produced a large crop of an estimated 420 million tons of rice in 2007, there is no doubt that major production shortfalls in a few key countries along with tight global stocks, are strengthening import demand, noted USDA economist Andy Aaronson, speaking at the USA Rice Outlook Conference in Orlando.
The increase in global production is due mostly to larger crops in China, Indonesia, Vietnam and Brazil. Conversely, there are smaller crops in India and Korea. Area harvested in 2007 is up only slightly from a year earlier and down 1 percent from the record level in 1999-2000. Area increased in China, Indonesia, Thailand and Vietnam. Area is down in the United States, Australia, Mexico and Japan.
Projected yields are trending lower, according to Aaronson. “In fact, we've been below trend for the past five or six years. Global yield grew about 2 percent in the 1960s, 1.2 percent in the 1970s, 2.3 percent in the 1980s and 1 percent in the 1990s. Today, global yield is growing at 0.6 percent, the lowest level it's been in recent history.”
Global supplies are headed downward, sharply. In October, USDA estimated global ending stocks at roughly 77 million tons. That dropped to 74.1 million tons in November and to 72.1 million tons in December. Supplies are down close to 50 million tons from the record level of 2001-02 and are at the lowest level since 1983-84.
Stocks are expected to climb in Thailand, Indonesia, China, the Philippines and the United States. The stocks-to-use ratio is at 17.5 percent, down from 18.5 percent last year, the lowest level since 1976-77, “which is significant,” Aaronson said.
Global trade in calendar year 2008 is projected at a record 30 million tons, up nearly a million tons from 2007. Imports are up slightly in Sub-Saharan Africa and Southeast Asia and up significantly in Oceania and Australia.
Top rice importers in 2007 were Indonesia, at almost 2 million tons, followed by the Philippines and others for a world total of 29 million tons. In 2008, USDA is projecting the Philippines as the top importer, at almost 2 million tons, followed by Nigeria and Indonesia.
Export bans in various countries were factors affecting global exports in 2007. One of those countries, Thailand, was still the world's top exporter for 2007, shipping an estimated 8.5 million tons, followed by Vietnam, at 4.6 million tons. The world's third leading exporter, India, imposed an export ban for high quality rice, but still shipped 4 million tons.
These bans are providing export opportunities for the United States, China and Pakistan, according to Aaronson. “For 2008, with the export bans still in place, we have Thailand exporting 9 million tons, while India is down to 3.4 million tons. We're really not sure what India is going to do, whether or not the export ban will still be in effect. So the numbers could change.”
Some of the strength in import demand comes from disasters in Australia and Bangladesh. In the latter, Cyclone Sidr “caused substantial human, property and crop losses. Recently, we received a report indicating that about 30 percent of the Aman rice crop is affected, resulting in the likely loss of 600,000 tons of rice.”
The Aman crop, harvested in November and December, is one of three rice crops grown in Bangladesh each year.
“The government is developing contingency plans to increase grain production for the coming season to at least partially offset the cyclone damage, by providing seeds and credits for upcoming crops.”
China continues to try and reduce some of its burdensome rice supply, according to Aaronson. China currently holds about half of the world's stocks. “As its economy has become more diverse, a lot of the area in rice is going into other uses. Luckily, they have a large supply available, but at some point, we feel they will start to encourage rice production again.”
Other export destinations for rice include Sub-Saharan Africa, “where there is a big deficit between production and consumption. Their imports have been at a fairly high level from China, Thailand and Southeast Asia and a little from the United States.
“Latin America's deficit between production and consumption is made up by imports largely from the United States. We have seen some growth in rice production in Argentina and Uruguay, and given the high prices, we may see more land going into rice production. Brazil rice production is having a hard time competing against corn and soybean production, so we're not seeing an expansion of rice there. Brazil is in a rice deficit situation and imports most of its rice from Argentina and Uruguay.
“Europe and the Former Soviet Union also import a good bit of rice. We wish we could export a lot more rice to Europe, but we might get that market back again.”
Australia's rice acreage has plummeted to 15,000 acres, after having been as high as 310,000 acres. “They have been in a drought over the last four to five years. Their reservoirs are at critical levels and when it comes to the allocation of irrigation water among producers, rice is on the lowest part of the totem pole. Australia is importing close to 300,000 tons of rice this next year.
Aaronson noted that the export bans, dollar weakness and the high commodity prices for wheat, soybeans, feedgrains and other commodities such as crude oil are translating into higher prices for rice.
“Global rice prices will remain firm, but the lifting of export bans in Vietnam as winter and spring crop supplies begin arriving in February and March will temper prices. He added that a weak dollar helps U.S. rice exports, however, the value is tied closely to the U.S. economy performance.”