2002 Rice Outlook   Published on July 1, 2002

Rice production is predicted to slow down this year, whereas global consumption is on the rise. Thus ending stocks of rice worldwide are expected to fall. Import growth is forecast in countries whose production is subject to the El Nino weather pattern and immediate import requirements. Overall rice exports should fare well, but higher prices in some countries may deter export growth. India is in limelight this year thanks to its very competitive prices and plentiful rice stocks.

While record US supplies and the current downturn in global rice prices are forcing US prices down to unprecedented levels, the Thai government is struggling to shore up prices through price intervention programs, which have so far proved successful. Limited export supplies from Pakistan and Vietnam are keeping prices high currently, while India is offering significantly lower prices thanks to its export subsidies. However, world rice prices may fluctuate in the future pending the arrival of new crops, the impacts of weather conditions and changing demand from importers.

Production

According to the USDA, global 2001/2002 rice production is forecast at 397 million tons (milled basis), nearly 700,000 tons lower than the previous year. The harvest season is well advanced in countries in the southern hemisphere and around the equatorial belt, many of which are already in the process of reaping their main crop. Preliminary forecasts mostly point to diminished production. For instance, heavy floods are estimated to have caused a one million ton drop in production in Indonesia, while drought might have impaired planting in Malaysia. In Africa, low prices in the past season, insufficient rains at planting time and localized flooding at the development stage are likely to have resulted in a decline in output in Madagascar.

2001/2002 rice production in selected countries (milled basis)

Country	Volume (million tons)
Burma	10.44
China	126.00
India	90.00
Indonesia	32.42
Pakistan	3.74
Thailand	16.50
Vietnam	20.63
US	6.76

Source: USDA's rice production forecast

In South America, a negative outcome is foreseen in Argentina, a reflection of poor producer prices last year, Chile, Ecuador and Uruguay, where crops have suffered from excessive precipitation. In contrast, output is officially forecast to rise by over 10 percent in Brazil.

In Australia, the size of the crop could be down 32 percent, with the decline attributed to reduced availability of irrigation water, abnormally cool temperatures at the early stage of crop development and weed infestation.

Early prospects for 2002 paddy production in the northern hemisphere are clouded by a possible recurrence of the El Nino phenomenon, which might distort the weather pattern during the second half of the year. In the EU, a favorable 2002 paddy season is anticipated. Based on farmers' declared planting intentions, output in the United States is forecast to remain close to the 2001 record.

A fall in production is currently predicted in India and China, though less pronounced than in the previous two years. Moreover, lingering drought problems are anticipated to severely constrain plantings and output in Pakistan. Paddy production could also recede somewhat in Thailand and the Philippines, while an increase is foreseen in Bangladesh and Vietnam.

In Egypt, high producer prices in 2001 may induce an expansion of rice cultivation this season, but much will depend on water availability at the time of planting.

Overall, little change is anticipated in Central America and the Caribbean, although a recovery is expected in Mexico, Costa Rica and El Salvador.

As for ending stocks, global rice consumption in 2001/2002 is predicted to reach 407.7 million tons, up 1.7 million tons from a year earlier and the largest figure to date, while production is lower at 397 million tons. As consumption exceeds production, ending stocks are expected to fall 8 percent to 126 million tons in 2001/2002. A reduction in ending stocks is also likely to be experienced by Brazil, Egypt, Indonesia, and Japan. On the other hand, the season is anticipated to end with a larger rice carryover in Bangladesh, India, the Republic of Korea and the United States. Overall, both importing and exporting countries are likely to face a stock reduction by the close of their 2001/2002 seasons.

Export

India is expected to regain its status as a major supplier of the international rice market this year. According to a recent USDA forecast, its exports are projected at 4.5 million tons, much higher than 1.7 million tons last year. The potential export growth can be attributed to the country's huge of stock of as much as 30 millions tons, which puts pressure on the government to subsidize sales abroad. Price-competitive rice from India is currently displacing some traditional exporters. Obvious examples of this are the loss to India of Pakistan's traditional market in Africa and Vietnam's position as second biggest rice exporter.

Pak rice prices are relatively higher due to the limited output this crop year. Therefore, Pak rice exports this year is estimated at 1.25 million tons, lower than last year's estimate of 2.2 million tons.

Vietnam's rice exports are expected to fall to 3 million tons this year from 3.7 million tons last year. Reasons for the export decline are currently uncompetitive price levels and limited export supplies caused by expected lower output, strong domestic demand in anticipation of drought-induced shortfalls and speculative hoarding by farmers. In line with this, the country has recently revised its export target to only 2.5 million tons from a previous target of 3.2 million tons.

Rice export volume in selected countries

Country	2001 (million tons)	2002 (million tons)
Burma	0.67	1.25
China	1.85	1.50
India	1.70	4.50
Pakistan	2.20	1.25
Thailand	7.52	7.25
Vietnam	3.70	3.00
US	2.63	2.80

Source: USDA's rice export forecast

Thailand is expected to export 7.25 million tons, marginally lower than last year's record 7.52 million. Over the past several months, overall overseas demand for Thai rice has been rather weak, as elevated price levels supported by ongoing intervention programs by the Thai government have kept prices less competitive amidst tense competition of cheaper rice from other sources like India.

US rice exports, on the contrary, are predicted to grow to 2.8 million tons in 2002, up from 2.6 million tons last year, mainly to nearby markets in Central America. Also, a bumper crop this marketing year, which amounts to as much as 6.76 million tons (milled basis), the highest since 1997/1998, have weakened prices to more competitive levels.

The anticipated expansion of the global market this year should give scope for larger rice sales by Myanmar, whose 2002 rice exports are projected at 1.25 million tons, up from 0.67 million tons a year earlier. After rice export suspension in 1988 to ensure national food security, Myanmar has since 2000 eagerly geared up for rice exports to increase national income. In contrast, short supplies might result in a drop in deliveries by Australia, and Uruguay.

Imports

According to the USDA, the world rice import forecast for 2002 stands at 24.6 million tons (milled basis), down from 24.83 million tons last year. Among major importers, import increases are forecast for Indonesia (3 million tons from 1.5 million last year), Iran (1.25 million tons from 0.74 million tons) and Saudi Arabia (1 million tons from 1.05 million tons). Indonesia's increase could be attributed to domestic shortfalls caused by unfavorable conditions for planting, while the other two countries, which rely solely on foreign rice imports, have registered consistent increases over the past few years. Rice flows into Central America and the Caribbean are anticipated to expand somewhat to compensate for the production shortfall last year.

Rice import volume in selected countries

Country	2001 (million tons)	2002 (million tons)
China	0.27	0.31
Indonesia	1.50	3.00
Iran	0.74	1.25
Iraq	0.96	1.00
Nigeria	1.74	1.50
Philippines	1.18	0.65
Saudi Arabia	1.05	1.00
Senegal	0.86	0.85
US	0.41	0.40

Source: USDA's rice import forecast

On the other hand, import decreases are expected for Nigeria (1.5 million tons from 1.74 million last year). The decline could be attributed to the raise in import duties to 150 percent in April, twice as high as in 2001. Imports by other African countries, a major force in sustaining international trade last year, are also expected to be lower, especially in the major markets, i.e. Cote d'Ivoire (0.57 million tons from 0.65 million last year), and Senegal (0.85 million tons from 0.86 million)

Likewise, most of the other traditional rice importers in Asia are expected to reduce imports, including Bangladesh (0.4 million tons from 0.402 million last year) and the Philippines (0.65 million tons, the lowest since 1998, from 1.18 million), both of which gathered excellent crops in 2001. During the past few years, the Philippines' rice imports have consistently slowed down owing to substantial domestic output.

Prices

In spite of the long-term decline in global rice prices, prices have remained relatively steady so far this year. Much of this reflects the program of intervention purchases in Thailand, where the Government appears determined not to let prices fall the way they did a year ago. Additionally, due to the present appreciation of the baht, Thai prices have risen about US$ 5 per ton since early May despite currently low overseas demand. Since January, weekly prices have ranged from $192-212 per ton, higher than during the comparable period last year. However, Thai parboiled rice prices have weakened since last October given tougher competition from cheaper parboiled rice from India.

The overall price strength in Thailand contrasts with a continued weakness in US prices following bumper crops this year. As a result, the price difference between Thai and US high quality long grain rice shrank to $2 per ton in April 2002, compared with $101 per ton one year earlier. Usually, US rice trades at a higher price than Thai rice for comparable grades. US prices have hit historical lows in many decades, but US rice has become more competitive in the world market and sales have reportedly grown based on export pace to date.

Meanwhile, sale prices were steady to strong in Pakistan, both for Basmati and IRRI rice, due to lower output caused by irrigation water shortage and strong domestic demand. High Pak rice prices are responsible for weak export performance this year. Similarly, quotations in Vietnam, which had softened in March when supplies from the winter/spring crop reached the market, showed a general tendency to recover in April and have continued rising. Vietnam prices have been up about $10 per ton over the past few months. The strong price increase can be attributed to currently low export supplies, as a lot of rice is needed domestically in anticipation of drought-induced shortfalls and speculative hoarding by farmers has been reported to be considerable so far. Also, lower harvests of some crops may put pressure on price levels. At present, Vietnam rice is trading at just a few dollars below Thai prices, whereas Vietnam prices are usually $30-40 lower. However, a lack of new sales and the entry of the summer/autumn crop are likely to lower prices later on this year.

Source: FAO

By contrast, most Indian rice prices have weakened compared with the levels prevailing earlier this year because of significant subsidies by the government and enormous stockpiles. As a result, rice from Indian origin remained the most competitive on the market.

Although the prospects for international rice prices in the coming months have brightened following the announcement of a surge in imports by Indonesia, there is still considerable uncertainty regarding purchases by China. The price outlook is also dimmed by the growing presence of India as a cheap rice supplier to the world market. However, of even more fundamental importance will be the development of the harvest in the Northern Hemisphere in the coming months.