Rice

by Chris Lyddon
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Rice markets remain slow and prices under pressure with new crops weighing on a market overhung by big stocks and slowed by a strong U.S. dollar.

“Activity in global rice markets was generally thin in the period since late November, with pressure from limited fresh buying interest and new crop supplies in key exporters weighing on sentiment,” the International Grains Council (IGC) said in its Grain Market report in late January. “Highlighting the weaker tone, IGC GOI rice sub-Index fell by around 2%.”

Export values for white and parboiled grades in Thailand were broadly steady in limited trade, it said. “Following a year in which exports surged to more than 10 million tonnes, recent activity was especially sluggish, with added pressure from main crop supplies and the government’s huge intervention stockpile.

“Recent announcements indicating that efforts will be stepped up to sell a significant amount of stocks in 2015 are expected to ensure that markets remain under pressure in at least the near term. As of Jan. 21, quotations for 5% broken were $3 per tonne lower than in late November, at $402 fob, the lowest since June of last year.”

The USDA attaché in Thailand said in a weekly report dated Jan. 15 that, “most traders reported that foreign buyers are anticipating export prices for Thai rice, especially white rice, may drop in February as supplies from Vietnam’s main-crop paddy production harvest enter the market. However, export prices for Thai fragrant rice firmed slightly, reflecting some exporters’ need to purchase domestic rice in order to fulfill their export commitments.”

Elsewhere, broken rice markets in Vietnam were weighed by worries about slower demand amid renewed competition from Thailand’s traders, especially in Asia, with values currently at close to 10-month lows, the IGC said.

“Although offers in South Asia were, at times, supported by firmer buying interest from African importers, competitively priced supplies at other origins weighed, with quotations also influenced by currency movements,” the IGC said.

In its Rice Outlook report in January, the USDA’s Economic Research Service suggested rice could get cheaper in the following month. “Prices will likely face downward pressure by February as Thailand’s main season harvest is nearly completed and the harvest of Vietnam’s largest crop starts, likely stimulating stronger trade,” the ERS report said. “Prices for all grades of Thailand’s regular-milled white rice are basically unchanged from a month earlier, largely due to recent light sales activity.

“Price quotes from Vietnam have decreased over the past month, with sales weak except to China. U.S. prices for long-grain milled rice are unchanged from a month earlier as well.”

The USDA now puts global rice production for 2014-15 at 475.5 million tonnes (milled basis), up 200,000 tonnes from the forecast made a month before but still 1.5 million below the 2013-14 record global crop. It is the first decline in global production since 2009-10.

South Asia accounts for most of the decline in global production projected for 2014-15, the ERS said. “In contrast, both East Asia and Southeast Asia are projected to harvest record rice crops in 2014-15. South America’s rice production is projected to be up about 1%, while production in Sub-Saharan Africa is projected to decline slightly in 2014-15,” it said.

“At 160.6 million hectares, global rice area in 2014-15 is fractionally below the year-earlier record. The average global yield in 2014-15 is forecast at 4.41 tonnes per hectare (on a rough-rice basis), fractionally below 2013-14 and below the 2012-13 record of 4.45 tonnes.”

In its rice price update, the United Nations Food and Agriculture Organization said that in December 2014, the FAO All Rice Price Index (2002-2004=100) averaged 224 points, down by a striking 4% from November, and the fourth month of consecutive declines.

“Prices subsided in all the four market segments, in particular for aromatic rice, which weakened by 11% to a level not seen since November 2007,” it said. “Likewise, prices of the higher and lower qualities Indica softened by 2% and 4%, respectively, while Japonica prices retreated by 2%. The general weakness that dominated the market in December was a reflection of an anemic import demand combined with a strong U.S. dollar, the currency denominator of international prices.”

Export prices dipped most in Vietnam, India, and Pakistan as new supplies reached the market, while they stayed relatively firm in Thailand, ERS said. “Prices were weaker-to-stable in the Americas, reflecting prospects for larger crops,” it said.

“Over the full 2014 calendar year, the FAO All Rice Price Index averaged 235 points, slightly above the 233 points recorded in 2013,” it said. “However, prices were significantly down for the three most important traded rice categories, namely the Higher Quality Indica, the Lower Quality Indica and Aromatic Rice, which respectively shed 6%, 11% and 5% from 2013. Only the prices of Japonica rice strengthened in 2014, by a sizable 16%, reflecting the very tight supply situation that characterized that market segment for most of the year.”

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