The rice market has seen price declines around the world in recent months as buyers hold back in a market that’s facing a record crop.

The latest USDA Economic Research Service Rice Outlook noted that “prices for most grades of Thailand’s higher and medium-quality, regular-milled white rice declined 5% to 8% over the past month, mostly due to lower domestic prices and a depreciation of the Thai baht compared with the U.S. dollar.

“Price quotes from Vietnam have also declined over the past month, mostly due to a lack of new buyers except for China. U.S. long-grain export prices for both milled and rough rice have increased slightly since early August. Prices for California milled rice for the U.S. market and for export have remained unchanged over the past month.”

The International Grains Council (IGC) outlined the state of the world rice market in a report issued at the end of August. “Reflecting general weakness across world markets, the IGC GOI rice sub-Index declined by around 7% month on month, to its lowest in about three years,” it said. “Limited export interest and government efforts to offload reserves weighed heavily in Thailand, while softer buying interest and the completion of state stockpiling pressured in Vietnam.”

In contrast, however, U.S. milled rice cash values were steady on fundamental support amid expectations for the smallest outturn in nearly two decades, the IGC added. Thai prices have moved lower.

“Export quotations for white and parboiled rice in Thailand declined further during August as efforts by the government to offload a portion of its increasingly burdensome intervention stockpile weighed heavily on sentiment,” the IGC said. “Offers for the key 5% grade fell by $40 over the month, to a three-year low of $423 fob. This resulted in a further narrowing of the premium (or spread) over values at competing origins, particularly Vietnam.”

Demand for Thai rice remained extremely weak, reflecting sluggish demand from key importers, coupled with concerns about the quality of stored rice, it said.

Prices were also weaker in Vietnam. “Softer import demand from China and key African buyers weighed, as did the completion of the government’s summer-autumn crop stockpiling program. However, overall declines were capped by some mild underpinning from reported discussions with Indonesia and the Philippines surrounding possible imports later this year.”

Prices in India fell by 9% in August on “prospects for a record summer-sown (kharif) outturn.”

The IGC predicted a rise of 5 million tonnes in global rice output in 2013-14, reaching a record 474 million tonnes.

The FAO reported that its Rice Price Index (2002-2004=100) dropped by about 3% in August to a value of 234.

“The weakness was most apparent for Indica rice, with the higher and lower qualities retreating by 3% and 5%, respectively,” it said. “The slide in prices was less marked for Aromatic rice, which fell by 1%, while Japonica rice quotations were virtually unchanged.”

“Export prices faltered in virtually all origins, but especially in India and Thailand, following the release of supplies from government stocks and depreciating currencies against the U.S. dollar. However, prices were also down in the United States and Pakistan, while they firmed in Vietnam, which nonetheless remained the cheapest source of supplies. Based on the FAO Index, average export prices in the first eight months of 2013 stood 1% above their corresponding average in 2012, with fragrant rice quotations up 23% year on year.”

In a report dated Sept. 10, the USDA attaché in Thailand said that “trade sources reported that overseas buyers have switched to purchase more rice from Thai exporters following a sharp reduction in Thai export prices in recent weeks.”

However, the attaché said Thai export prices are vulnerable to decline due to a rumor that Vietnam is also lowering its export prices to compete with Thai rice.

Chris Lyddon is World Grain’s European editor. He may be contacted at: [email protected].