Grain Market Review: Rice

by Chris Lyddon
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rice
Markets move up ahead of Ramadan.
Photo courtesy of Adobe Stock.
 
Rice markets have largely moved higher, helped by increased demand as Ramadan, due to start in late May this year, approached. A smaller U.S. crop means lower forecast global 2017-18 production worldwide while global consumption continues to edge up, despite a shift away from rice in some countries.

The International Grains Council’s (IGC) Grain Market Report, published in late April, said that Asian markets had mostly firmed with the IGC GOI sub-Index climbing to an eight-month peak.

“Buoyed by talk of substantial fresh sales to Iran, together with reports of a smaller-than-anticipated off-season crop, 5% broken values in Thailand rose by $23, to $370 fob,” the IGC said. “At $394 fob, prices in Pakistan were up by 4% on signs of improved demand in the run up to Ramadan, while offers in India advanced to $390 fob amid currency movements and tightening kharif supplies. In contrast, quotations in Vietnam eased to $344 fob on seasonal harvest pressure and thin buying interest.”

The FAO’s Rice Price Update for May also reported higher prices. The FAO All Rice Price Index (2002-2004=100) gained 3.6 points (1.8%) in April 2017 to arrive at a nine-month high of 198 points, it said.

“The steepest climb concerned Aromatica quotations last month, which posted their fifth successive monthly increase, rising by 7.7%,” the FAO said. “Gains were in the order of 1.5% for Higher Quality Indica rice and of 0.7% for Lower Quality Indica supplies. Japonica quotations remained mostly stable.”

Export prices tended to strengthen in most Asian origins during April, amid intensifying demand, often from Near Eastern buyers preparing for Ramadan, the FAO said.

“Vietnam stood as an exception to this trend, with sentiment in the country taking a bearish turn as much anticipated G2G business failed to materialize, while the winter-spring harvest entered its final stage,” the FAO noted. “In Thailand, benchmark 100% B white rice rose by 3% to $394 per tonne, buoyed by anticipation and eventual confirmation of large sales to the Islamic Republic of Iran. A stronger Rupee and tight supplies ahead of the Rabi harvest lent further support to quotations in India, while dwindling availabilities and sales to regular African outlets caused Indica offers in Pakistan to resume their upward trajectory.”

In the Americas, prospects of steep cuts to 2017 plantings, combined with lower-than-expected inventory levels, underpinned Indica prices in the United States, although gains were capped by disappointment over lack of U.S. awards in a recent Iraqi tender, the FAO said.

Monthly rice price chart
Rice, 5% broken milled white rice, Thailand nominal price quote, U.S. dollars per tonne.
Source: World Bank
 
“Prices also regained ground in Uruguay, following sales to Iraq and Latin American buyers, whereas new crop arrivals and slow demand extended losses of Argentinean and Brazilian quotations,” the FAO noted. “According to the Index, international rice prices in the first four months of 2017 were 0.8% below year-earlier levels, with the weakness confined to the Japonica and Higher Quality Indica segments.”

In its Grain: World Markets and Trade report, the USDA’s Foreign Agricultural Service (FAS) noted a shift in the worldwide pattern of prices.

“Under recent harvest pressure and weak off-shore demand, Vietnamese exporter quotes have been trending lower,” the FAS said. “Meanwhile, other Asian suppliers have seen strengthening. Robust demand from Nigeria and Iran has lifted quotes for both Thailand and India. Pakistani quotes are even higher as the country steadily supplies markets in advance of Ramadan. These developments have narrowed the gap between quotes for most Asian exporters and the Western Hemisphere suppliers.”

The FAS predicted a small fall in global rice production in 2017-18 to 481.3 million tonnes, with the most significant decline in the United States.

“The U.S. crop is forecast down 10% to 6.4 million tonnes on reduced long-grain area,” the FAS said. “In Egypt, area and production are down because of restrictions on water use. India’s crop is forecast slightly lower, whereas Sri Lanka’s crop is forecast to rebound from a drought-stricken 9-year low to a record. Production in Thailand is also expected higher on main-crop recovery with ample water supplies.”

Global consumption continues to rise, though the growth is modest, the FAS said.

“Food use is growing with the largest increase in India, based on a growing population,” the agency noted. “Feed and industrial use is expected to increase in Thailand, as the remainder of government stocks are anticipated to be used. Rice feed use is forecast down in China. Within certain countries in Southeast and South Asia, diets are shifting away from rice and toward wheat. Therefore, despite growing populations, total rice consumption in Bangladesh is flat and in Indonesia is declining as a higher proportion of food grain consumption is derived from wheat.”

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