The global rice market in the midst of a major makeover
In the past four decades, the global rice market has been dominated by a few exporters, namely, Thailand, Vietnam, the United States, and Pakistan, accounting for 60-70% of the total exports. Over this period, Thailand has remained as the top rice exporter in the world. Unlike the export side, which has been dominated by a few exporters, the import side looks quite fragmented, with a large number of countries each importing a small amount of rice. The top six importers account for only 20-30% of the market share.
New roles for China and India
Over the years, both China and India, the top two rice producers and consumers in the world, have played a minor role globally with occasional exports and imports. Despite India’s rise as an exporter since the mid-1990s, both these countries, which account for half of global rice production, have largely focused on domestic food security. Trade is an afterthought for these two giants and it is mostly used to manage occasional surpluses and deficits.
But, this might be a thing of the past with India’s meteoric rise to the top of the export chart and China’s unexpected rise to near the top of the import chart in 2012 (Figure 1). In 2012, India displaced Thailand from the top spot by exporting 10.25 million metric tons of rice vis-à-vis 7 million tons for Thailand. India’s removal of its export ban on the nonbasmati market in late 2011 after a gap of 4 years, burgeoning domestic stocks, and a weak rupee would have definitely increased India’s export prospects in 2012. But, Thailand’s mortgage scheme should get most of the credit for India’s rise to the top by making India’s broken and parboiled rice fly off the shelves like hotcakes.
Similar to India, nobody expected China to come close to displacing Nigeria as the top importer in 2012, with 2.7 million tons of imports compared with 3.4 million tons by Nigeria. A majority of these imports have come from Vietnam and Pakistan. Apart from rice, China also imported a large amount of wheat and corn (maize) last year. Altogether, Chinese grain (wheat + rice + corn) imports, as shown in Figure 2, increased from 2.5 million tons in 2011 to 10.9 million tons in 2012. Tight corn supplies and greater demand for wheat from the feed sector increased their imports but nobody is certain why China imported so much rice. There was no apparent shortage in the domestic market but domestic market prices were higher following the double-digit rise in minimum procurement prices in the last few years, making it attractive for Chinese traders to import cheap foreign rice.
Both India and China have maintained their respective positions as dominant exporters and importers, respectively, in the global rice market in the first quarter of 2013. From January to March 2013, China imported 692,200 tons of rice (see oryza.com) whereas India exported nearly 2 million tons of rice (compilation from different sources). If this trend continues, they are likely to grab the top exporter and importer spot by the end of 2013.
Some indications suggest that China and India are here to stay for the “long haul.” In the case of India, the government wants to move nonbasmati rice area from the northwestern states of Punjab and Haryana, which are plagued by water shortages and pest and disease problems, to eastern India. Several programs such as the National Food Security Mission (NFSM), National Rural Livelihood Mission (NRLM), and Bringing Green Revolution to Eastern India (BGREI) have been rolled out by the government to expand rice production in the eastern states and the impact is already evident from the rapid rise in production in the last few years.
Similar to India, the Chinese government is also trying to expand rice production to keep up with the demand, but the rapidly rising costs of production and pressure on rice area from other competing crops are likely to keep imported rice a lot cheaper than producing rice domestically. Unless the Chinese government is strongly determined to achieve rice self-sufficiency through trade measures, it is reasonable to assume that Chinese imports will continue in the near term to mid-term.
What does this mean for global food security?
On the positive side, the greater participation of China and India in the rice market is likely to expand the volume of trade, thus bringing greater stability to the market. Ideally, the global rice market should account for 15-20% of total production compared with 6-8% now. On the other hand, both these countries will bring greater uncertainty to the market as their politicians will continue to fiddle with domestic and trade policies to support farmers and achieve greater price stability and domestic food security. This is exactly how Thailand has held the global market hostage through its rice pledging scheme, for which nobody knows how and when the mortgage stocks will rock the market.
- Tags: food security