Grain market review: Rice

by Teresa Acklin
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   After holding within a fairly narrow range for more than a year, world rice prices fell steeply in early 1993. Prices for Thai No. 2 grade rice, f.o.b. Bangkok, declined to $216 a tonne in April, down more than $50 from levels prevailing in January.

   The price tumble was triggered by a shift in Indonesia's supply/demand situation. After importing 650,000 tonnes of rice in calendar year 1992, the U.S. Department of Agriculture is projecting Indonesia's 1993 net imports to total 450,000 tonnes. Record production resulting from expanded harvested area and good growing conditions allowed for the shift in Indonesia's trade balance.

   Over the years, occasional spikes in prices frequently have been caused by the appearance or disappearance from world markets of Indonesia, India or China. For example, purchases by China and Iran in 1988-89 led to a sensational surge in prices.

   While the latest drop in prices underscored the continued volatility of the world rice market, a gradual broadening of the world market for rice is beginning to lay the foundation for greater stability.

   “World trade can swing widely from year to year, making prices volatile'' according to Randy Schnepf, Economic Research Service, U.S. Department of Agriculture. “China, Indonesia and India are the countries who move markets. If you remove those three markets, there is good growth, and long-term prospects are good. There is an underlying strong trend for growth from the Mideast, Latin America and North Africa.''

   For example, imports by Turkey are projected at 250,000 tonnes in 1993, compared with 110,000 tonnes in 1987. Total world trade in 1992-93 was projected by U.S.D.A. at 14.3 million tonnes, off from 14.9 million in 1991-92 but up from an average of 12.6 million in the two years prior.

   If world trade continues to expand, the potential impact on prices of the three Asian giants could be significantly reduced.

   Another stabilizing force in world markets has been Vietnam's re-emergence as a net exporter. Both in 1992 and 1993, Vietnam was expected to ship 1.9 million tonnes of rice abroad.

   Helping shore up world rice prices in recent years has been a flattening in the rate at which rice yields worldwide increased each year. Yields in 1992-93 were projected at 3.55 tonnes per hectare, compared with 3.53 tonnes in 1991-92. From 1976-84, world rice yields increased an average of 3.5% each year. Since 1984, the rate of yield increases has diminished to 1.3% annually.

   No reversal of this trend toward small increases was considered likely. Farmers in China, the world's largest producer, have been switching to higher quality/lower yielding varieties in reaction to market conditions. Additionally, most land in China that is suitable for irrigation has already been converted.

   In fact, throughout Asia, “with respect to the general input package of fertilizer, pesticides and irrigation, yields have nearly been maximized,'' Mr. Schnepf said. “The difference between what is achieved in research fields and what is achieved by farmers has been narrowed.''

   Looking further into the future, Mr. Schnepf noted that several groups are looking for ways to bring yields upward to the next plateau. Most of these efforts center on finding new rice varieties through biotechnology. “These ideas are still several years away from practical application,'' he said.