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Rice prices in 2001 will probably
remain at their lows due to the continuing imbalance
between global supply and demand.
One reason for the slump in rice
prices is that rice ending stocks have been growing
consistently larger since 1995/96. Up until 1996/97,
the rice trade globally was enjoying a boon with prices
reaching record highs. As a result of this, farmers
increased their production output.
Source: United States Department of Agriculture (USDA)
This situation eventually
led to output outstripping demand, and various governments
ended up with oversupplies. As rice ending stocks continued
to grow, the rice trade began a period of decline culminating
in a slump, which can be clearly seen by the record
low prices in 2000.
Another factor that
has affected rice prices globally has been the use of
government intervention programs. When a government
intervenes in the rice market, or offers subsidies,
it effectively cushions the market. As producers continue
to increase their output, this can lead to unnaturally
high government stocks. This year, some major rice-producing
countries have been attempting to lower their stocks
by trying to export more. Both Thailand and India are
facing this situation, which they would like to quickly
address.
The USDA has predicted
that India's ending stock from 2000 through to 2001
will grow by 3.25 million metric tons, or 15 per cent
to 20.88 million metric tons, which will represent about
35 per cent of the world's total ending stock. In view
of this, the Indian government earlier this month aimed
to resolve the situation by dumping rice stocks in the
ocean. Thailand hopes to improve the situation by trying
to export 700,000 metric tons of rice, although success
could be limited given that the market is saturated
and the competition intense.
Source: United States Department of Agriculture (USDA)
Global rice prices
will likely decline due to low prices. According to
the United States Department of Agriculture (USDA),
both global production and ending stocks are set to
decrease. Production is projected to drop by 12.55 million
metric tons to 59.78 million metric tons in 2000/01,
while ending stocks should fall by 5.69 million metric
tons to 59.78 million metric tons. However, prices are
unlikely to witness an immediate improvement due to
the market's saturation.
Source: United States Department of Agriculture (USDA)
Indonesia, the Philippines, Japan, and Brazil are all
set to reduce their rice imports this year in light
of increased domestic rice production. Moreover, the
rice trade in general has levelled off since the start
of 2000. Major rice-exporting nations are currently
competing to export to Africa and the Middle East due
to the brighter prospects in these markets. Iran, Iraq,
Nigeria, and Senegal, four of the world's leading six
rice importers, are continuing to import greater quantities
of rice every year. These countries' imports account
for almost 20 per cent of the global rice trade volume.
In a highly competitive environment where Thailand,
Vietnam, China, Pakistan, and India are all aiming to
win market share in Africa and the Middle East, rice
prices globally are likely to remain at their lows this
year.
Source: FoodMarketExchange.com
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