Grain Market Review: Rice

by Chris Lyddon
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Rice supply and demand
Prices lower as 2016-17 crop expected to exceed record production.
Record rice production in 2016-17 will exceed consumption, triggering a rise in stocks. Prices around the world have fallen.

In a commentary to its Rice Price Update report, the United Nations Food and Agriculture Organization (FAO) said that its All Rice Price Index (2002-04=100) declined by 4.5 points (2.3%) in August to an average of 195 points, reversing all gains registered since May 2016.

“The fall was mostly imputable to easing long-grain quotations, as the High Quality Indica Index slid 4% below July levels, while the monthly decline was in the order of 3.1% for the Lower Quality Indica Index,” it said. “Prices of Aromatica rice also softened by 3%, while the Japonica Index held steady at an average of 221 points.

“With the exception of South American origins, where quotations continued to firm on tight availabilities and sales to Brazil, prices in all other major origins tended to subside in August. In the absence of substantial demand from key buyers such as the Islamic Republic of Iran and Nigeria, a late August import tender for 250,000 tonnes by the Philippines failed to make a noticeable mark on prices.

“As a result, quotations continued to fall in Vietnam, taking a downturn in India, Pakistan and Thailand as well. Benchmark Thai 100%B white rice slid 4.9% below July levels, with Thai parboiled prices incurring a steeper (11%) monthly drop, amid added pressure from increased paddy arrivals. Long-grain quotations also softened in the United States, notwithstanding extensive flooding problems in southern producing states.”

The FAO’s All Rice Price Index showed international rice prices in the first eight months of 2016 were 9% below year-earlier levels, with the steepest declines concerning Japonica and Aromatica varieties.

In its Grain Market Report in August, the International Grains Council (IGC) said that white and parboiled rice prices in Asia softened in the period since the last report, with the IGC GOI sub-index falling by 7% to its lowest level in more than three months.

“The market in Thailand was weighed by sluggish international demand and increasing secondary (off-season) crop arrivals, while additional pressure stemmed from efforts by the government to offload state reserves through a series of auctions,” the IGC said. “At $369 fob, 5% broken was down by $43 month-over-month.

“In India, market participants were focused on the progress of kharif (summer-sown) plantings, which advanced rapidly against the backdrop of generally good monsoon rains. Offers for 5% broken fell by $21 to $377 fob. Values in Pakistan retreated sharply, by 14%, to $352 fob, ahead of the arrival of new crop availabilities, although losses were capped by recent heavy rains and logistical constraints.”

In contrast, sentiment in Vietnam was underpinned by expectations for increased sales to the Philippines, with 25% broken up fractionally, at $332 fob, the IGC said.
Rice supply and demand
Source: U.S. Department of Agriculture
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In its Rice Outlook Report, dated Sept. 14, the USDA’s Economic Research Service (ERS) said prices for most grades of Thailand’s regular-milled white rice decreased 8% to 9% over the past month, mostly due to sales of government-held stocks and strong competition from Vietnam’s rice.

“Vietnam’s rice typically sells at prices $20 to $40 per tonne below prices for comparable grades of Thailand’s rice,” the ERS said. “U.S. prices for long-grain milled rice continued to decline over the past month as well, partly a response to expectations of a bumper long-grain crop in 2016-17 and weaker global trading prices.”

The USDA now projects global rice production in 2016-17 at a record 481.7 million tonnes (milled basis), up 700,000 tonnes from the forecast it made a month earlier and up more than 2% from a year earlier.

“The expected recovery from the 2015-16 El Niño-reduced global rice crop is primarily due to expanded area,” it said. “At 161.6 million hectares, global rice area is up 2.7 million hectares from a year earlier, but still 200,000 hectares below the 2013-14 record. Brazil, Burma, Cambodia, China, India, the Philippines, Sub-Saharan Africa, and the United States account for the bulk of the projected global area expansion in 2016-17, with India and the United States accounting for more than a third of the expected increase. The average global yield of 4.45 tonnes of rough rice per hectare is up slightly from 2015-16 and the highest on record.”

It puts global consumption (including a residual component) for 2016-17 at a record 478.8 million tonnes.

“With global production exceeding consumption, total ending stocks of 115.6 million tonnes are up 1.8 million tonnes from the previous forecast and up 2.9 million tonnes from a year earlier,” it said. “India, Vietnam, and the United States account for most of the upward revision in the 2016-17 global ending stocks.”