What does the global rice market look like in 2013?
Not a lot is happening in the rice market right now. Harvesting of the wet-season crop in Asia is almost complete and the overall production situation looks very encouraging. Despite some early-season drought scare in India, the kharif (wet-season) rice crop has recovered nicely and the Ministry of Agriculture now predicts the crop to be around 86 million tons (milled equivalent). This is slightly lower than the record harvest of the 2011 kharif crop but is still higher than what was harvested in the past few years. With huge procurement stocks in government warehouses (nearly 35 million tons of milled rice equivalent as of 7 December 2012), the slight decline in rice production does not seem to be a problem for India.
For many other Asian countries, including Vietnam, China, Bangladesh, and Pakistan, 2012 rice production is estimated to be at record levels. According to the USDA, overall global rice production for 2012-13 is estimated to be around 465 million tons (milled equivalent), more or less the same as the record production of 2011-12. But, ending stocks for 2012-13 are projected to decline by 3 million tons (from 106 million tons in 2011-12 to 103 million tons in 2012-13) because of strong growth in rice consumption. In the past 7 years, global rice consumption has increased by more than 50 million tons, with an average annual growth of nearly 2%. This has restricted the accumulation of stocks at a faster pace despite good harvests in the past few years.
Global rice prices have been fairly stable in the past year after a runup in the first half of 2011 in anticipation of the reintroduction of the Thai pledging scheme and a subsequent drop in the fourth quarter of 2011 after the re-entry of India into the nonbasmati export market. The end results have been the emergence of India as the top rice exporter in 2012 and the dethroning of Thailand from the top rank for the first time in three decades.
Another new development in the past year has been the emergence of China as the second-largest importer behind Nigeria, with 2.6 million tons of imports.
According to a recent article (7 January 2013) by Carolyn Cui in the Wall Street Journal, experts are split on the reason behind the recent rise in Chinese rice imports. Some believe that rising demand for rice by Chinese consumers has outstripped production growth, causing imports to rise. Others feel that the higher support price set by the Chinese government to bolster production is creating an incentive for local traders to import rice from Vietnam, India, and Pakistan.
Whatever the reason may be, it is difficult to predict what China will do in the future. But, one thing is very clear: the Chinese government is in a mood to bolster stockpiles and allow imported rice to enter the country to keep domestic prices in check.
As we look ahead into 2013, rice prices are likely to be range-bound in the next few months, with plenty of rice for sale from India, Vietnam, Thailand, and Pakistan. There is also a possibility of prices declining if these exporters are aggressive in unloading some stocks before the new crop arrives. Even the continuation of Chinese imports is unlikely to provide much upward push on prices.
The monsoon holds the key to what will happen to rice prices in the second half of the year. The market is well positioned to handle isolated incidences of extreme weather. But, a bad monsoon (too much or too little rain) in the major rice-growing regions may spell doom for the market and push prices higher.