Rice supply-demand outlook improving, prices not so much

Rice supply-demand outlook improving, prices not so much

“World consumption is expected to exceed production by 6.9 million metric tons,” says Dr. Childs, who contributes the rice analysis for the WAOB. “As a result, ending stocks for 2015-16 are projected to drop 7 percent to 91.5 million tons, the lowest since 2007-08. This is the third consecutive year of declining global ending stocks of rice.”

All the signs point to an improved supply and demand situation for the global rice industry. But that doesn’t mean world rice prices will move higher any time soon, according to Nathan Childs, senior agricultural economist with USDA’s Economic Research Service.

The world is expected to have record rice crops in 2015-16, with production projected to be up 1 percent from 2014-15, but total supplies are expected to decline for a second consecutive year due to a smaller carry-in, he says.

Dr. Childs was the featured speaker for the University of Arkansas Extension Services’ new webinar series. His topic, “2015-16 U.S. and Global Rice Outlook with Nathan Childs,” was a timely one for producers who have been struggling with the weather on one hand and with lower rice prices on the other.

USDA’s World Agricultural Outlook Board, which provides the Agriculture Department’s monthly World Agricultural Supply and Demand Estimates, is estimating world rice consumption will increase by 1 percent from 2014-15.

“World consumption is expected to exceed production by 6.9 million metric tons,” says Dr. Childs, who contributes the rice analysis for the WAOB. “As a result, ending stocks for 2015-16 are projected to drop 7 percent to 91.5 million tons, the lowest since 2007-08. This is the third consecutive year of declining global ending stocks of rice.”

Carry-in stocks of rice from the previous marketing year are projected to be down 8 percent from a year earlier, he said. “This is the second year of a smaller carry-in with India and Thailand – the two largest rice exporters – accounting for most of the projected reduction in the 2015-16 carry-in.”

Paddy Pledging Scheme

Producers who follow the world rice markets know Thailand is coming off a period of time in which its exports were greatly restricted due to its “Paddy pledging scheme.” The end result of the failed policy was the country’s prime minister were removed from office by the Thai military and now faces indictment for her role in the program.

Thailand and India have each struggled with weather problems of their own, but both those countries appear poised to return to the global rice markets in a bigger way. With India and Thailand accounting for most of the increase in plantings, world production is expected to increase 6.4 million metric tons to a record 482.1 million metric tons in 2015-16.

That’s in contrast to 2014-15 when Thailand and India each planted less rice than they did in 2013-14 and then saw their yields impacted by droughts.

All told, record production is being forecast in 2015-16 for East Asia, Southeast Asia, Sub-Saharan Africa and the Middle East, according to Dr. Childs. Larger, but not record, crops are projected for South Asia and South America.

That includes record crops for China, Bangladesh, Vietnam, Malaysia, the Philippines, Pakistan, Burma and Cambodia and larger, but not record crops for India, Indonesia, Thailand and Egypt. Thailand’s production is projected to increase 6 percent from the 2014-15 drought-reduced crop.

“Assuming a normal monsoon, India is projected to increase production more than 1 percent from this year’s below trend production,” says Dr. Childs. “But its production would still be below record.”

Post-election decrease

Those larger crops will be offset somewhat by production declines in South Korea and Nigeria due to decreased planted area, a slight decline in the United States, mostly due to smaller area, and Australia due to its continued drought.

Stable production is projected for Brazil and Iran and little change in production is expected in the European Union or the former Soviet Union, neither of which are major players in the world rice markets.

“All of these initial production forecasts for 2015-16 assume normal weather worldwide,” Dr. Childs notes.

On the other side of the balance sheet, global rice consumption is forecast at 489 million metric tons, which would be an increase of 4.3 million tons from 2014-15. China would account for more than half the projected increase in domestic and residual use.

Besides China, record consumption is expected in India, Indonesia, Bangladesh, the Philippines, Thailand, Burma and Cambodia. Vietnam’s consumption is projected to be unchanged from its 2014-15 record and larger, but not record, consumption could occur in the U.S., Brazil and Japan.

“These increases are partially offset by projected consumption declines for Nigeria, which will see its consumption return to normal after elections, and South Korea, where they are seeing long-term, diet diversification,” says Childs.

Higher populations

Two factors are driving the record global consumption and residual use – population growth and rising incomes in some developing countries, particularly in Sub-Saharan Africa, according to Childs. “Non-table food uses of rice such as for feed and for industrial products and processed foods are also playing a role.”

One of the prime ingredients in the lower price outlook is that global rice trade in 2016 is projected to be down 2 percent from the 2015 record to 42.3 million. That would still be the third highest on record, but fewer sales generally translate to lower prices for rice.

“We expect to see much weaker exports from India and smaller shipments from Pakistan, Guyana and Australia,” says Childs. “Those are not projected to be fully offset by increased shipments from Burma, Cambodia, Egypt, Paraguay, Uruguay and the United States.”

Burma and Cambodia are relatively new additions to that list, having only recently returned as significant rice exporters.

“In the early 2000s, Burma and Cambodia almost totally disappeared from the rice export markets due to political turmoil in those countries,” said Childs. “Now both are back and significantly adding to their rice exports.”

To view Dr. Child’s presentation, click on https://www.youtube.com/watch?v=4Ftjq5gigR0&feature=youtu.be

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