Tight global rice supplies and a surplus of rice in the United States are improving prospects for increased U.S. rice exports in the coming year, according to USDA economist Nathan Childs, speaking at the USA Rice Outlook Conference in New Orleans.
Unfortunately, U.S. prices aren't reflecting the world shortfall at this time. And the current export pace needs to pick up if forecasts are to be met.
For the 2004/05 year, USDA expects smaller total global supplies, tight exportable supplies and near-record consumption. USDA also expects weaker global and Asian import demand, higher trading prices and a fourth consecutive year of declining global ending stocks.
Changes in China's and India's rice production are big reasons for the continuing decline in global ending stocks, projected to be the smallest since 1983-84, at around 75 million tons. That's down significantly from 150 million tons four years ago.
“In India, monsoons hurt rice production and took rice stocks down,” Childs said. China's reduction in production comes from government policies to discourage rice production implemented after stocks reached burdensome levels in 1999.
Global stocks should remain at current levels or slightly below for the long term, according to Childs. “The only way to reverse that would be for China to change its policies back to those of the mid 1990s, and there's really no economic reason why they would want to do that.”
Global rice imports are projected to drop four percent in 2005, with Indonesia, Nigeria, the Philippines, Saudi Arabia, Brazil and Bangladesh expected to import less rice than in 2003. Reasons include no severe weather problem in a major importing country (except Bangladesh), an import ban by Indonesia and large supplies in most major importing countries.
“All of the Asian countries that import rice have record or near record supplies,” he said. “But with consumption growing every year and little ability to expand area and difficulty in boosting yields, we see trade picking up (to the region) in 2005-06.”
Thailand, India and Vietnam are among countries expected to export less rice in 2005 than in 2004, with Pakistan and the United States expected to export slightly more.
Meanwhile global trading prices are rising because of tight supplies in several major exporting countries, including China, India and Vietnam.
In the long-term for the global rice market, Childs expects very little area expansion, slow yield growth, a steady rise in consumption and increasing import demand, especially from Asia, Sub-Saharan Africa, and the Middle East. Higher trading prices could also be part of the picture as well as no significant growth in stocks.
For the United States, USDA is projecting record total supplies, smaller imports for medium and short grain rice, higher total use and stronger total exports, although rough rice exports are projected lower. Childs expects a big boost in carryover, little change in farm price and much smaller price difference over Asian competitors in the global milled rice market.
In 2004, expanding plantings boosted the U.S. rice crop to a record 227.7 million hundredweight, which included a fifth consecutive year of record average yield. Production was higher in all rice producing states for long and medium/short grain rice.
“The record yields are due to new varieties and new hybrids that have been released and generally good weather in the South. We're well above trend, record yields each year. This year, we had phenomenal weather.”
California and Arkansas were responsible for most of the increase in production over last year, according to Childs. “California has a huge crop to move into a rather small market.”
For 2004-05, U.S. rice imports are projected to decline 7 percent, the first decline since 1999. This is due to projections that the United States will regain a large share of the Puerto Rican market, due to lower California prices.
U.S. milled rice exports are projected to increase 5 percent in 2004-05 while rough rice exports are projected to fall off slightly, primarily due to a decline in rough rice exports to Brazil.
The good prospects for milled rice exports are because of record U.S. supplies which have led to declining prices since mid-July, especially for long grain. “There was also a big drop in the U.S. price difference over Thailand in the long grain market, to around $60 a ton.
But the export pace needs to pick up, according to the economist. “Our exports are about 15 percent behind a year ago and we're a third through the year. There are a lot of reasons why it will — prices are lower, the differential has declined, the United States has plenty of supplies and no one else has a large supply.”
Meanwhile, U.S. ending stocks are projected to be the highest since 1986-87, “which indicates a downward price for the United States.”
“Early in the beginning of the 2004-05 marketing year, cash prices were coming in at $8 to $9 a hundredweight. A lot of that was old crop sales. This means that the price is going to have to drop sharply in the remainder of the marketing year to hit the $7.25 season average farm price projected by USDA.”
A bearish outlook for U.S. rice prices will come with another bumper crop and record U.S. supplies, while a bullish scenario comes from stronger global prices and tight supplies in most other exporting countries, according to Childs.
Over the next decade, USDA expects steady to rising area for U.S. rice, continued growth in field yields, a steady increase in imports, expanding domestic use, stronger global demand for U.S. rice, higher global trading prices and a rising U.S. farm price for rice.
Childs added that Southeast Asia is moving into a moderate El Nino weather phenomenon. “Thailand and Vietnam have experienced quite a bit of dryness and their crops are already projected down from a year earlier. I think what this says is that there is a lot of upside potential in the global market on rice.”