Farmers harvest rice at Xinghua in October 2017 in Taizhou, Jiangsu Province of China. Photo by VCG/VCG via Getty Images
Farmers harvest rice at Xinghua in October 2017 in Taizhou, Jiangsu Province of China.

China dominating in rice could offer export opportunities

China is fast becoming the 800-pound gorilla in the world’s rice markets.

As it has with other crops, including cotton, corn and wheat, China is fast becoming the 800-pound gorilla in the world’s rice markets.

Based on what’s happened in recent years, China is now the top producer, top consumer, top stockholder, top importer and a “rising exporter” of rice, according to a USDA Foreign Agriculture Service international economist.

“One thing to note, as was highlighted in the February 2018 Grain World Market and Trade Report, is China has strengthened its importance in global rice trade not only as an importer but now strikingly also as an exporter,” says USDA’s Rachel Trego.

Trego, who is team leader for food grains analysis at USDA-FAS’ Office of Global Analysis, said China’s exports have been relatively limited because of the high domestic rice prices within the country until recent months. Most Chinese exports have tended to be to the nearby regional markets such as South Korea, Mongolia and Hong Kong.

“But we've begun to note some new developments that have been remarkable, which is part of why we noted this in our reports,” said Trego, who was a presenter for a University of Arkansas Systems Division of Agriculture Food and Agribusiness Webinar. (To view the webinar, click on https://youtu.be/ohf8Tt8LR8E.)

Part of that, Trego says, is that China has begun resuming exports to Africa. “These dwindled and virtually were down to nothing by the time of 2012, but, in 2017, approximately two-thirds of Chinese exports were to Africa.

“There have been a couple of reasons they have been able to enable these exports. China has begun to have some more available supplies of some of the multi-year-old rice from the stocks. China is beginning to auction off and have increasing amounts of sales from the auctions of some of the 2013 rice from the government temporary reserves.”

Less from Thailand

Meanwhile, the amount of rice Thailand has been exporting, especially to Africa, has dwindled, as Thailand is left with only the no-longer-good-for-human consumption rice within the country’s domestic stocks.

“Given Thailand’s ending of exporting especially low-priced rice to Africa, China has been able to see some in roads into Africa, as well as beyond,” said Trego, who is a regular contributor to USDA’s World Agricultural Supply and Demand Estimates.

“Notably, China’s average export price as reported by China’s custom data developed precipitously in 2017, and this has been quite interesting in that the Chinese customs data also shows that the exports have primarily been of medium-grain rice. Seeing prices in the $500 per range on average for total exports is certainly a shift from where they have been in the past.”

With China becoming a top importer of rice, as well, U.S. growers are asking where the U.S. stands on its ability to tap into the Chinese import market, which up to now has been confined primarily to nearby rice-producing countries such as Burma and Cambodia.

“USDA has been working actively on a phytosanitary protocol for access of rice to China, and this process has lasted for more than a decade,” Trego said. “On the U.S. side, USDA’s Animal Plant Health Inspection Service has been working with the AQSIQ, the comparable agency in China. We had it signed a couple years ago at the technical level, but we were waiting for it to be signed at the political level, which was finally accomplished in 2017.

“Although the phytosanitary protocol has been signed, there remain a few steps, including a questionnaire that has been sent to the United States regarding some of the facilities as well as audits,” Trego noted. “While the phytosanitary protocol has been signed, there are still some steps to take before we can begin to see U.S. shipments of rice to China.”

Judging from Chinese domestic prices relative to some of the California export prices, U.S. export quotes at times have been lower than Chinese retail prices. “That may suggest some opportunities to be able to ship to China if given the opportunity once the phytosanitary protocol and the necessary arrangements are accomplished,” Trego said.

Types of rice

During the question and answer session of the webinar, Trego was asked what types of U.S. rice would be competitive in China’s markets?

“The predominant suppliers right now to the China market have been some of the neighboring countries that are sending long-grain rice,” she said. “As noted from that exporter export quote chart earlier, the Asian prices for long-grain are quite a bit lower than those for the U.S.

“So for long-grain it would primarily be focusing on some of the high-end and niche markets. China has been importing, especially because of price, but also because of concerns on food safety, and so really targeting the high end would be helpful for that on long grain.”

For the medium- and short-grain, China has a Tariff Rate Quota for medium-grain, and the U.S. is a predominant medium-grain exporter and is relatively competitive. “Given the price chart I shared earlier for Chinese retail versus U.S. prices, given the limited competition from other medium-grain suppliers in that market, there could be some great opportunities.”

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