Slow demand and currency movements have pushed export quotations from the world’s major rice suppliers lower. At the same time, concerns are being expressed over adverse weather in some of the most important producing regions.

In a commentary on its Rice Price Update September, the United Nations Food and Agriculture Organization (FAO) reported a 0.7% or two-point fall in its All Rice Price index, bringing it to a value of 209 points.

“The drop reflected a 2% slide in the lower and higher quality Indica sub-indices, while those tracking Japonica and aromatic rice quotations remained steady,” it said. “In the aromatic market segment, India and Pakistan’s basmati prices rebounded somewhat in August, compensating for a continuing drop in Thailand, where the fragrant 100% B quotation fell below $1,000 per tonne for the first time since May 2011.”

Slow import demand and currency movements weighed on export quotations of the major suppliers, it said.

“At $382 per tonne, the benchmark Thai 100% B white rice price was down by 5% in August, reflecting both a softening of demand and the devaluation of the baht against the U.S. dollar,” it said. “Market weakness also impacted prices in other origins in Asia, particularly Pakistan and Vietnam, and in South America, while prices held steadier in the United States and Australia.”

According to the FAO All Rice Price Index, international rice prices averaged 8.7% lower over January-August 2015 compared with the corresponding period in 2014, it said.

“The slide was steepest for aromatic rice prices, which were 30% cheaper year-on-year,” it said.

The International Grains Council (IGC) also reported lower prices. “Across much of Asia and the Americas, white and parboiled fob prices declined during August, largely reflecting export competition for scarce business and currency movements,” it said in its Grain Market Report at the end of August. “The IGC GOI rice sub-Index posted a net fall of 3% in the period since the last GMR.

“Increasing worries about lagging monsoon rains in key rice-producing states in India offered only marginal market support, as a weakening domestic currency weighed, the key 5% broken grade dropping by $26, to $362 fob. In Thailand, news of fresh sales from government stocks and a softening of the Thai baht against the U.S. dollar pressured, while heightened worries about competition from Vietnam prompted some traders to lower prices in a bid to boost buying interest.”

The IGC reported recent large purchases by China.

“Data from the General Administration of Customs, which exclude large volumes of unofficial trade along southern borders, show total rice imports (product weight basis) in the first seven months of 2015 at 1.7 million tonnes, an increase of 16% y/y,” it said. “The country’s large purchases are attributed to the wide differential between domestic and international prices.”

It also discussed the effects of the weather. “Global rice production prospects typically hinge on monsoon rainfall to replenish water reserves,” it said. “In Thailand, rainfall during the current season has generally been below average, despite a good month in the northeast in July and heavy rains during August,” it said. “However, government officials continue to warn of water shortages.

“Significant deviations from average rainfall have emerged in recent months in Vietnam and Cambodia, potentially affecting key crop outcomes. In July, authorities in Vietnam’s central and northern regions advised farmers to switch to drought-resistant alternatives to rice. Warnings from the government of Indonesia continued in August in relation to dry weather in Sumatra and Java, important islands for rice cultivation.”

In its Rice Outlook for September, the USDA’s Economic Research Service identified adverse weather as the main factor behind weaker yields which have caused a reduction in the global crop. It forecast world rice production for 2015-16 at 475.8 million tonnes (milled basis), a drop of 2.9 million from its forecast a month earlier and almost 1% down on the record of the previous year.

“This is the first decline in global production since 2009-10,” it said.

The U.S. Rice Producers Association has welcomed a phytosanitary protocol agreed between the United States and China.

“The U.S. has not been permitted to ship to China because rice was not included in the original negotiations that resulted in the sale of millions of tonnes of soybeans and cotton and other grains,” the association said. “That now changes with the new phytosanitary protocol.

“A number of importers and distributors in China have been identified, and it is likely that the newly-permitted trade will get off to a fast start. It is not clear how large the trade could become once the logistics and the commercial terms are perfected, but China could represent a significant boost to the U.S. rice market, which recently has been slammed by the loss of markets and low-priced subsidized foreign competition.”

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