|No. 4||Rome, December 2004|
Source: FAO. Note: Totals computed from unrounded data.
With the 2004 season almost concluded in the southern hemisphere and main (first) season harvests in the major producing countries in the northern hemisphere also almost complete, good estimates of the crops gathered are now available and the overall outlook for global paddy production in 2004 has become much firmer. However, since the secondary (mostly irrigated) paddy crops in the northern hemisphere now account for a larger share of production, developments that might affect these crops, which are still in the ground in some countries, could still have a large impact on the final outcome of the season.
FAO’s forecast for global paddy production in 2004 has been raised by 3 million tonnes since the last report in September to 611 million tonnes. This revision mainly reflects expectations of larger crops in China (Mainland), Indonesia, the Philippines, the United States and Viet Nam. Improved prospects in those countries more than offset downward revisions to the forecasts for Cambodia, Japan, Peru and Thailand. The outlook has also deteriorated in parts of Africa, where crop development has been impaired by irregular and inadequate precipitation and by locust infestations in some cases.
At the current forecast level, world paddy production would be 27 million tonnes or almost 5 percent up from 2003, and close to the record level of 1999. The bulk of the increase compared to the previous year is expected in Asia, and mostly in China, where good weather, rising market prices and the reintroduction of incentives to rice farmers, in the form of tax exemptions, minimum protective prices and, for the first time, of direct payments to grain growers, have led to increased rice cultivation and higher yields. Excellent growing conditions and an expansion in plantings due to government support to domestic producers also led to a sizeable increase in Indonesia, to a record level. In Japan, output is anticipated to recover only partly from the poor 2003 level, as crops this year have been damaged by typhoons. Production in the Republic of Korea is likely to recover fully from last year’s reduced level, despite a reported reduction in the area under rice. Elsewhere in the region, favourable crops are expected in Afghanistan, the Democratic Republic of Korea, Pakistan, the Philippines and Viet Nam. By contrast, adverse weather conditions, in particular drought and floods, are anticipated to cause output to fall in Bangladesh, Cambodia, India, Malaysia, Myanmar, Nepal, Sri Lanka and Thailand.
Aggregate rice production in Africa is also set to rise this year, reflecting good crops in Egypt, Madagascar and, to a smaller extent, in Guinea Bissau, Nigeria and Tanzania. However, an erratic rainfall pattern, aggravated in some cases by locust infestations or civil strife, is anticipated to depress production in Chad, Côte d’Ivoire, Ghana, Malawi, Mali, Mozambique and Senegal.
In Latin America and the Caribbean, excellent paddy crops were harvested earlier this season in Argentina, Brazil and Uruguay, reflecting favourable growing conditions and a shift into rice cultivation because of improved profitability. Production is also anticipated to rise in Bolivia, Colombia and Mexico, but is estimated to have fallen substantially in Ecuador and Peru, reflecting drought problems during the season, and in Chile due to low prices in 2003 that prompted a shift out of rice. Prospects are also rather bleak in Central America and the Caribbean, where crops have been damaged by drought, pests and hurricanes, with declines foreseen in Costa Rica, Cuba, the Dominican Republic, Haiti, Nicaragua and Panama, while only modest output gains are prospected in Honduras.
In the rest of the world, production is set to rise by 14 percent in the United States to a record level, reflecting sizeable increases in area and yields. Production recovered slightly in Australia from the drought-reduced 2003 crop but remained well below the normal level. Output in the EU-25 is expected to increase with larger crops gathered in Italy and Spain, the main producing countries.
Early information regarding the 2005 paddy season is already available for several southern hemisphere countries, where planting of the main paddy crops is underway. Production in Australia is tentatively forecast to remain close to the 2004 level at 559 000 tonnes, since lack of precipitation in New South Wales has again put constraints on the availability of irrigation water. The 2005 outlook is also somewhat unfavourable in South America, where drought has delayed plantings. Early forecasts indicate production could fall by 5 to 6.5 percent in Brazil. Some area reduction is also anticipated in Uruguay. By contrast, an expansion is forecast in Argentina.
As increasing information on actual rice flows becomes available, FAO’s forecast for rice trade in 2004 has been lowered by about 400 000 tonnes, to 26.1 million tonnes. On the demand side, imports by Bangladesh have been revised downwards from 800 000 tonnes to 655 000 tonnes, following the release of official forecasts. Import forecasts for Iraq, the Democratic Republic of Korea, Singapore, Cote d’Ivoire, Ghana, Madagascar and Nigeria, which are mostly derived from the trade by destination records of major exporters, were also scaled down. By contrast, the forecasts for Brazil, Costa Rica, the Islamic Republic of Iran, Peru and Saudi Arabia were raised.
On the supply side, a number of major changes have been made to the 2004 trade outlook. The first relates to China (Mainland), which, based on performance from January to October, is now foreseen to export 850 000 tonnes in 2004, substantially less than the 1.4 million tonnes previously forecast. Similarly, sales from India, which amounted to some 1.5 million tonnes between January and June, are anticipated to reach about 2.6 million tonnes by December, 200 000 tonnes less than the earlier forecast, since tight supplies probably constrained availabilities during the rest of the year. The USDA also pointed to a less buoyant export performance by the United States, with the 2004 forecast cut by 9 percent to 3 million tonnes because of slower pace of sales expected in the last quarter. Shipments from Japan and Myanmar were also reduced. By contrast, based on its export record for the first ten months, the outlook for Thailand’s total deliveries in 2004 has been raised by 800 000 to a record 10 million tonnes.
At the latest forecast level, global rice trade would be almost 6 percent below the revised estimate for 2003. Most of the expected decline reflects limited supply availabilities in several of the major exporting countries. In particular, China is set to reduce rice deliveries to some 850 000 tonnes, or one-third of the volume shipped in 2003. Similarly, India might sell 2.6 million tonnes, substantially less than the 4.4 million tonnes of last year, with shipments of ordinary milled rice particularly affected by the withdrawal of export subsidies. Given the export ban in place since January, rice flows from Myanmar are also likely to have fallen to a mere 150 000 tonnes, consisting mainly of informal, cross-border transactions with Bangladesh and China. Relatively high domestic prices are estimated to have negatively affected exports from the United States in 2004. Tight supplies in Pakistan are likely to result in lower sales. Part of the above exporters’ shortfalls are forecast to be filled by larger exports from Thailand, now set to reach a record 10 million tonnes, or 38 percent of overall trade, and from Viet Nam , where shipments might reach 4 million tonnes. Sales from Argentina, Egypt, and Uruguay are also likely to increase, as abundant rice supplies have allowed them to take advantage of the more favourable price conditions this year.
Much of the anticipated contraction in trade in 2004 would be on account of lower deliveries expected to three of the most important rice markets, namely Indonesia, Bangladesh and Brazil. In Indonesia, imports are anticipated to fall from 2.5 million tonnes to 1 million tonnes, since imports have been barred for most of the year. Brazil is also estimated to reduce its purchases, now put at 850 000 tonnes, compared with 1.1 million tonnes last year. Similarly, the latest official forecast for imports to Bangladesh, at 655 000 tonnes, is almost 1 million tonnes less than in 2003. Imports by the Democratic Republic of Korea, Nicaragua and Tanzania are also anticipated to be smaller. By contrast, shipments to most of the other major importing markets are foreseen to increase. This applies to China (Mainland), which is set to purchase 750 000 tonnes this year in reaction to high domestic prices, close to three times the volume reported in 2003, but also to the Philippines, Saudi Arabia and Sri Lanka. Imports to Africa are forecast to reach 8.1 million tonnes (or 31 percent of the expected global volume of trade), slightly up from 2003. Imports are expected to increase in most of the region but in particular to Benin, Cote d’Ivoire, Ghana, Mozambique and South Africa. Current prospects for Nigeria point to little change from last year. With the country aiming at boosting production, rice imports this year have been subject to a surcharge of 10 percent, in addition to the prevailing 100 percent tariff. Increased purchases are anticipated to be made by the Dominican Republic, Peru and the United States. Imports by the EU-25, which lowered tariffs on husked and milled rice as of September 2004, are forecast at 880 000 tonnes.
Given current production prospects, FAO’s first forecast of trade in 2005 points to a decline of about 900 000 tonnes to 25.2 million tonnes compared with the level expected in 2004. The drop would result principally from supply constraints in some of the major exporting countries, especially Thailand, India and Uruguay. In the case of India, the possibility of re-introducing export subsidies is still being considered by the Government. In absence of such assistance and given the poor 2004 production prospects, shipments might fall to 1.9 million tonnes in 2005, consisting mainly of Basmati and parboiled milled rice, as has been the case in 2004. Sales by Guyana could also be hindered by increased competition on the EU market following the implementation, since September 2004, of a new common external tariff structure. By contrast, given the favourable production outlook in 2004, exports from China (Mainland) in 2005 could recover sharply to 2 million tonnes. Increases are also anticipated in Pakistan and the United States, while Viet Nam and Egypt are expected to maintain exports close to the relatively high levels they are expected to achieve this year.
On the demand side of the international market, Brazil, China (mainland), the Islamic Republic of Iran, the Philippines and the United States are all anticipated to reduce their imports in 2005. Although overall shipments to Africa are still forecast to exceed 8 million tonnes, Nigeria, the region’s major importer, may also purchase less if the current protective government policies become more effective. By contrast, imports to Indonesia, which will be much influenced by the outcome of the crops harvested early next year, may rebound somewhat, under the assumption of a return to normal weather after the exceptionally good conditions in 2004. Among the other principal rice importers, shipments to Bangladesh are also set to rise, given the poor 2004 production outlook, while for the enlarged EU-25, they are currently forecast at 950 000 tonnes, 8 percent more than in 2004.
Global rice stocks still set to fall despite improved production prospects
FAO’s latest forecast for global rice stocks at the close of the 2004 crop seasons has been revised up by 2 million tonnes to 99 million tonnes, reflecting the recently improved prospects for production in 2004. However, this amount would still be 4 million tonnes less than the opening level, representing the fifth consecutive year-on-year decline.
Compared with their opening levels, end-of-season inventories are anticipated to drop in Bangladesh, India, Thailand, Senegal, Ecuador and Peru, reflecting the poor 2004 production prospects. They could also end lower in China, Nigeria and the EU. By contrast, a number of countries are expected to increase their reserves, especially Brazil, the Islamic Republic of Iran, Japan, the Republic of Korea and the United States. Stocks are anticipated to remain close to last year’s levels in Egypt, Myanmar and the Philippines.
Although international rice prices remain well above 2003 levels, the declining trend, which started in August, continued over the past two months, driving the FAO All-Rice-Price Index (1998-2000=100) down from 102 in September to 100 in November. Of the four major rice categories monitored by FAO, prices of Japonica rice have come under most downward pressure with the index dropping from 100 to 92 over the three-month period. Regarding Indica rice, prices fell in October, but part of the loss was recouped in November. By contrast, quotations for aromatic rice have strengthened by 3 points since September.
Within the Indica, higher quality, market, prices for different origins diverged. United States’ rice quotations weakened, especially for parboiled rice, prompted by expectations of large production gains this season. Similarly prices for Indica rice from Pakistan fell substantially, reflecting to some extent a weakening of the local currency relative to the US dollar, but also the absence of new deals with Sri Lanka and other traditional markets in Eastern Africa. By contrast, Thai Indica rice prices rose, mainly supported by the announcement of the new government procurement programme at higher support price levels.
Prices for lower quality Indica rice followed a similar pattern, with rice from Pakistan losing ground since September, while export quotations for Thai or Vietnamese rice either firmed or remained steady.
Japonica rice prices have been bearish since August, on expectations of good crops in the United States as well as in the Republic of Korea, Japan and Egypt. The launching of several import tenders by Japan and the Republic of Korea in October and November failed to reverse the tendency.
Aromatic rice prices, on the other hand, have strengthened since September, reflecting concerns about drought in Thailand and the announcement that the country will increase support prices of fragrant rice varieties by 11 percent to Baht 10 000 (US$254) per tonne. Basmati rice prices from Indian origin also strengthened, but quotations of Basmati from Pakistan weakened, over the two months, as newly harvested supplies reached the market.
Prospects for international rice prices in the coming months are uncertain and will depend to a large extent on the final outcome of the 2004 crop. However, with production setbacks anticipated in several of the major exporting countries, export availabilities may be tighter in 2005. Additionally, import demand is anticipated to remain strong, especially since the impact of high freight rates is likely to be tempered by the relative weakness of the US dollar, so the dip in world rice prices may only be temporary.