by Chris Lyddon
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The problems of major exporter Thailand are the striking feature of the rice market, with large government stocks weighing on the market, although a weak baht has helped put up export prices recently. The world is heading for record production due to increased area driven by government support, while consumption is also up, although a long-term downtrend in Japan and Korea continues.

In a commentary to its January Rice Price Update, the United Nations Food and Agriculture Organization said that in December 2013 the FAO All Rice Price Index (2002-2004=100) averaged 227 points, up slightly from 224 points in November.

“Much of the index firmness came from higher quotations of aromatic rice, but prices in the other market segments were also up or unchanged,” it said. “Quotations in Thailand followed different directions: prices of fully broken rice (Thai AI Super) continued to ease, reaching their lowest monthly level since July 2010, while prices of the benchmark Thai white rice 100%B rebounded slightly. The picture was also mixed in the other origins.”

Despite their recent weakness, according to the FAO Index, rice export prices averaged 1% higher in 2013 than in 2012, sustained by a 21% gain for aromatic rice. In all the other rice market segments, prices in 2013 were lower than in 2012.”

In its Rice Outlook, the USDA’s Economic Research Service forecast global rice production for 2013-14 at a record 471.1 million tonnes (milled basis). Global rice production in 2012-13 is estimated at 469.5 million tonnes.

“On a year-to-year basis, both East Asia and Southeast Asia are projected to produce record rice crops,” ERS said. “The bumper global crop is the result of expanded area in 2013-14. At a record 160.1 million hectares, global rice area in 2013-14 is up 2.7 million hectares from a year earlier.”

“Burma, Cambodia, China, India, Nigeria and Pakistan account for most of the year-to-year area increase,” ERS said. “Much of this area expansion is driven by higher government support prices. The average global yield, forecast at 4.39 tonnes per hectare (on a rough-rice basis), is about 1% below the 2012-13 record. The yield decline is partly due to adverse weather in China and India, the world’s two largest rice producing countries.”

The ERS report projects global rice use for 2013-14 at a record 473.1 million tonnes, more than 1% larger than a year earlier.

“On an annual basis, Bangladesh, Brazil, Cambodia, China, Egypt, India, Indonesia and Vietnam account for most of the projected increase in global consumption in 2013-14,” it says. “In contrast, consumption (including a residual component) is projected to decline in 2013-14 in Japan and South Korea. Consumption has declined for several decades in both Japan and South Korea due to diet diversification.”

In a report dated Jan. 10, the USDA attaché in Bangkok noted that “export prices declined significantly due to the weakening of the Thai baht, which is approximately at 33 Baht/U.S.$ as compared to 32.5 baht/US$ in the previous week.

“Meanwhile, the government has reportedly received approximately 9.9 million tonnes of rice paddy (6.5 million tonnes milled equivalent) under the current MY2013-14 Rice Paddy Pledging Program,” the report said. “The pledges mainly consist of 5.5 million tonnes of white rice paddy (3.6 million tonnes milled equivalent), 3.9 million tonnes of fragrant rice paddy (2.6 million tonnes milled equivalent), and 500,000 tonnes of glutinous rice paddy (300,000 tonnes milled equivalent). However, the Bank for Agriculture and Agricultural Cooperatives reported that only approximately 10% of the farmers have received the loans under this program due to current limited financial resources.”

The ERS report also noted the drop in Thailand’s export prices.

“Prices for most grades of Thailand’s high-quality, regular-milled white rice have declined around 4% over the past month, with prices for medium- and lower-quality rice dropping around 10%,” the report said. “The price declines are largely due to a weaker baht, lack of new sales, and recent harvest of the main season crop. Prices for parboiled rice and aromatic rice have decreased as well. Both parboiled and aromatic rice are 
specialty rices.

“Prices for Thailand’s high-quality, 100-percent Grade B (fob vessel, Bangkok) milled rice for export were quoted at $414 per tonne for the week ending Jan. 6, down $16 from the week ending Dec. 9. Prices are now the lowest since January 2008.”

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