Grain Market Review: Rice

by Chris Lyddon
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rice
 
Recent weeks have seen a mixed performance for rice, with downward pressure on prices in Asia as new or imminent crops faced limited demand, while prices rose in the United States and in parts of South America. Taking a slightly longer-term view, the U.S. Department of Agriculture (USDA) highlighted a sharp rise in Thai jasmine rice prices as purchases from Iran have surged.

“Sentiment in most white and parboiled rice markets was little changed during August, with export quotations at key Asian origins falling further amid limited fresh buying interest and seasonal pressure,” the International Grains Council (IGC) said in its August Grain Market Report. “However, with offers in the U.S. and parts of South America firmer, the IGC GOI rice sub-Index was only fractionally lower m/m. Export quotations in Thailand eased, the 5% broken grade down by 3%, to a near-four-month low of $376 fob, as sluggish near-term demand and heavy supplies weighed. In Vietnam, offers were also weaker on sluggish buying interest. However, declines were likely capped by news that the Philippines was considering further large-scale imports to boost reserves. In Bangladesh, too, talk of more purchases added support.”

The IGC said tight supplies buoyed markets in India at times, while milled rice offers in the United States also strengthened the No. 2, 4% grade up sharply to $509 fob Gulf, on crop concerns and potentially tighter availabilities. The United Nations Food and Agriculture Organization (FAO) said its All Rice Price Index (2002-04=100) averaged 211 points in August, fractionally (0.2%) above its value a month earlier. In commentary to its FAO Rice Price Update for September it said: “Price movements tended to be mixed across the various rice market segments last month. Quotations of higher and lower quality Indica rice declined, while those of Japonica rice strengthened for the fourth successive month. In the Aromatica segment, although a slow pace of trade depressed basmati quotations, these falls were largely offset by stronger prices of Thai fragrant rice.”

Slow offshore demand weighed on export quotations across much of Asia last month, the FAO said.

“This was especially the case in Thailand, where new crop arrivals added downward pressure, and in Pakistan following efforts to liquidate stocks ahead of harvests,” the FAO said. “Prices also weakened in Vietnam and India, although in the former partial support was lent by a July sale to the Philippines, while currency movements tended to limit falls in India. Thai Hom Mali rice proved a notable exception to the falling tendency in Asia, posting a 12% monthly gain in August. The surge positioned the quality at a 22-month high, with the strength coming in response to seasonal tightness and strong sales to Chinese and Iranian buyers.”

In the Americas, prices were stable in most South American origins, but they continued to increase in the United States, influenced by a smaller expected 2017 crop, the FAO said.

According to the FAO All Rice Price Index, international rice prices in the first eight months of 2017 were 2% above their level in the corresponding period of 2016. The increase mirrored stronger prices of aromatic and lower quality Indica rice.

rice
5% milled broken white rice, Thailand nominal price quote, U.S. dollars per tonne.
Source: World Bank
 
In its Rice: World Markets and Trade report, the USDA explained that Thai jasmine rice prices have increased 70% since April.

“The primary demand shock has been an unusual sudden surge in purchases from Iran,” the USDA said. “Iran typically purchases basmati, an alternative and more expensive fragrant rice. In fact, in 2014, Iran purchased basmati rice at a price twice the amount of jasmine.

“However, this year, when Indian basmati prices were once again double those of jasmine, Iran purchased more than 100,000 tonnes of jasmine. These purchases have coincided with tightness in the Thai market as a result of stocks declining to the lowest level since 2008, and with a new jasmine crop not available until November. Compounding these factors is the appreciation of the Thai baht, resulting in Thai jasmine prices reaching the highest level since 2014.”

The recent spike in Thai jasmine prices has reversed the trend of steady decline over the past few years, slowly converging toward the price for non-fragrant rice, the USDA said.

“The government has encouraged fragrant rice production and supplemented the supply with the sale of stocks,” the USDA said. “Meanwhile, jasmine rice production has also been rising in neighboring countries such as Vietnam. However, Iran’s presence in the market has been and will continue to be a key factor in supporting Thai fragrant rice prices in the near future.”

The U.S. Rice Producers Association expressed concern over the effects of Hurricane Harvey on the crop in Texas.

“The damages and after effects will last for many years,” Dr. M.O. (Mo) Way, Professor of Entomology, Texas AgriLife Research & Extension Center, wrote in its publication, Rice Advocate. “About 90% of Texas’ main crop was harvested when Harvey struck, but a good portion of the remainder went underwater.”
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