by Chris Lyddon
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Rice production is set to break records, stocks are ample and Thailand, in particular, is keen to sell. It all adds up to a bearish outlook for the world rice market.

In a monthly report on the markets for all types of grain, the USDA’s Foreign Agricultural Service predicted lower prices for rice. “Record rice production, coupled with abundant and growing stocks, is expected to pressure prices downward,” it said. “Consumption is also at a record level, with continued growth in China and India. Government policies, especially in Thailand, will continue to impact global market dynamics.”

The latest USDA Economic Research Service Rice Outlook gives a forecast for global rice production in 2013-14 of a record 479.3 million tonnes (milled basis), an increase of 2% on the year, resulting from an expanded area. “Record crops are projected for China, India, Nigeria, the Philippines, Thailand and Vietnam,” it said.

The ERS projected global rice use for 2013-14 at a record 476.8 million tonnes, “with Bangladesh, Cambodia, China, India, Indonesia, Nigeria and Vietnam accounting for most of the projected increase.”

It put global ending stocks for 2013-14 at 107.8 million tonnes, the highest since 2001-02. “Total calendar year 2014 global rice trade is forecast at 38.6 million tonnes, nearly unchanged from this year, but 500,000 tonnes below the 2012 record,” it said. “Stronger exports from Thailand and Vietnam are expected to be nearly offset by weaker shipments from India and the United States. China, the E.U., Indonesia, Iran, Iraq, Nigeria, the Philippines and Saudi Arabia are projected to be the largest importers.”

The USDA ERS reported that “prices for most grades of Thailand’s higher and medium-quality white milled rice declined 1% to 2% over the past month, as the government is speeding up its rice stocks sales.”

“In contrast, prices for aromatic rice increased,” it said. “Price quotes from Vietnam continue to decline, largely a response to a slowing pace of sales in 2013 and large supplies in Asia.”

“U.S. prices for long-grain milled rice have increased since early April, a result of tighter supplies and continued strong export demand,” it said. “Prices for California milled rice for the U.S. market have remained unchanged over the past month.”

“Long-grain quotes from the top five exporting countries have continued to be relatively stable over the past month,” reported the Foreign Agricultural Service. “Although Thailand has recently lowered its quote, it is still over $120 more than other Asian quotes. The U.S. and South American quotes remain significantly higher than the Asian exporters.”

The USDA attaché in Thailand explained the situation there in a report in March. It predicted a recovery in production in 2013-14.

“Despite an anticipated recovery of rice exports in 2012-13 and 2013-14, Thailand will likely continue to have large carry-over stocks of no less than 10 million tonnes as the government is expected to keep the Rice Paddy Pledging Program as a core domestic support program,” the attaché said.

“In order to pay for its rice pledging programs, the government has to speed up the sales of its rice stocks as the state-run Bank for Agriculture and Agricultural Cooperatives (BAAC) is running into liquidity problems,” the report said. “The government rice stocks are expected to be sold at a discount and well below acquisition prices, particularly for low quality old-crop white rice, which will likely result in strong price competition and criticism among rice exporting countries.”

However, Thailand is unlikely to re-emerge as the world’s top exporter of rice given its current high prices and the strengthening baht, according to an MCOT news report quoted by the Thai Rice Exporters Association. Kobsuk Iemsuree, chairwoman of the association, said that Thailand may not achieve this year’s export target of 6 million tonnes despite an earlier adjustment from the original target of 6.5 million tonnes.

“She said the rice export volume should surge in Q3 and surpass the combined Q1 and Q2 volumes due to depleting stocks among importing countries like Japan, Iraq, Iran and varied African nations,” the news report said. “Thai exporters would like government-to-government rice deals, but they accept the fact that Thailand’s heyday on top of the rice market will not return.”

Not everyone agrees. The exporters association also carried a report from the Nation newspaper, which said that “despite sluggish global demand and reduced competitiveness, the Commerce Ministry is confident Thailand will be able to export 8.5 million tonnes of rice this year, generating $5.7 billion (Bt169.4 billion) — 20% higher than was achieved last year.”

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.