Oryza June 2013 Rice Market Review | Oryza

The Oryza White Rice Index (WRI), which represents the weighted average of white long grain rice fob export quotes from markets across the globe, ended June at $479 per ton, down by about 2% from $486 last month, amid declining Thailand, Vietnam, and U.S. rice quotes and rising rice price indications in Pakistan.
South America remains the most expensive origin at about $625 per ton for 5% broken rice with U.S. 4% close behind at $615 per ton. Asia remains at a steep discount to the Americas but for now these makets remain nearly entirely independent.
Thai 5% ended June at $480 per ton, inline with Pakistan 5% at $480 per ton. India 5% was shown about $35 per ton cheaper at around $445 per ton and Vietnam rice was the cheapest origin at $370 per ton, about a $110 per ton discount to Thai and Pak rice. Cambodian 5% rice was indicated at $470 per ton, just slighly below Thai quotes though it enjoys zero import duties to the EU.

Thailand

Thai rice quotes declined about 7% in June as Thai rice exporters priced rice more aggressively to move stocks. Thai 5% broken rice is today shown around $480 per ton. The Thai baht declined about 2% over the same period to around 30.99 per U.S. dollar, contributing to weaker rice quotes. Iraq continues to be an major destination market for Thai rice.

On June 18, the Commerce Minister announced a 20% cut to the rice pledging price to 12,000 baht per ton (about $387 per ton) from starting July 2013 from 15,000 baht per ton (about $485 per ton) previously. Thai government also set a limit for paddy purchases per farmer to 500,000-baht (about $16,333) worth of paddy rice under the rice mortgage program to help small farmers. Farmers grew upset and threated to protest. On July 1 –when the scheme was set to start – the government fired the commerce minister (as a scape goat) and reversed plans to lower the pledging price.

Farmers say that most of their paddy is sold at around 12,000 baht per ton anyway as millers claim high moisture content. Further, farmers say that profits were good in 2011 but are no longer attractive now considering the increase in production costs in the last two years.

In the first half of the year Thailand has exported about 1.7 million tons of rice If the current export pace continues, Thailand rice exports in 2013 are only likely to reach about 3-4 million tons, down from about 7 million tons in 2012 and about 10.3 million tons in 2011. An honorary president of the Thai Rice Exporters Association said that for Thailand to clear its rice stocks it would need to drop the paddy support price to around 10,000-11,000 baht (about $330-$360) per ton for Thailand to compete with other global rice exporters.

The government has about 17 million tons of rice accumulated under the scheme and has been less than forthcoming about losses. In mid-June, Moody’s Investor Services spoke with the Bangkok Post, clarifying that while the rating agency said the rice mortgage scheme was “credit-negative” due to high financial losses and reduced rice exports, the scheme would not affect the nation’s credit rating. However, the agency did state in its recent Credit Opinion on Thailand that deterioration in political stability would have a direct and negative impact on the nation’s credit worthiness and thus credit rating. While the ruling Pheu Thai Party is using the rice mortgage scheme to pacify farmers and hold on to power, political opposition has called for Prime Minister Yingluck Shinawatra’s resignation and the drama remains far from over.

India

Indian rice quotes were mostly unchanged in June. The value of the rupee declined about 5% over the month to around 59.5 rupees per U.S. dollar, suggesting that quotes would have been higher if not for the falling rupee. India 5% rice ended June shown around $445 per ton.

The average wholesale monthly rice price in India stand at around Rs.2,777 per quintal (about $457 per ton, using current exchange rates) as of June 27, 2013, up about 22% in local currency from around Rs.2,283 per quintal (about $410 per ton, using historical exchange rates) seen in June 2012 and up about 4% from May 2013. Local rice traders say prices are likely to increase further until the new harvest, which begins in October – November.

This year India’s arrived in record time and precipitation levels have been above the 50-year average in nearly all areas of the country. In the 4 months of the monsoon from June to September, rainfall is estimated to be 98% of the 50-year average; anything +/- 10% of the 50-year average is considered normal. Separately, most of the rice planting in North India is done in July-August, but recent flooding could increase field preparation work and delay planting this year.

However, India’s Kharif season rice crop planting area has increased to about 3.9 million hectares as of June 28, 2013, up about 32% from 2.97 million hectares in this time last year. India’s Kharif rice crop production is expected to increase to a record 95 million tons in 2013-14, up about 2.4% from around 92.75 in 2012-13 due to the timely arrival of monsoon rains this year. The secondary rice (rabi) crop in India usually contributes around 12-13 million tons of rice, which suggests that the total rice production in 2013-14 may touch a record 107 million tons in 2013-14, the highest ever and up almost 3% from an estimated 104.2 million tons produced in the previous year when monsoon rains were both delayed and deficient.

In addition, India already has about 33.3 million tons of rice in the central pool as of June 1, 2013, which is up about 3.6% from around 32.1 million tons recorded at the same time of the year in 2012. Current rice stocks are close to 2.3 times the buffer and strategic norms of around 14.2 million tons.

With high stocks and expectations of another bumper crop, it appears very unlikely the government will ban rice exports anytime soon. USDA The Post estimates total rice exports by India at around 9 million tons in the crop year 2013, down around 10% from around 10.4 million tons of rice exports last year, but still the second highest ever.

In late of June, Indian government has increased minimum support price (MSP) for common paddy rice for the year 2013-14 (October – September) by about 5% to about Rs. 1,310 per quintal (about $217 per ton, using current exchange rate) from around Rs 1,250 per quintal (about $225 per ton, using historical exchange rates) in the previous year.

Separately, The Indian government is considering reducing the amount of rice it buys at the intervention price from the current 30- 75% currently in different states to 25% starting October 1, 2013, a move which may hurt farmer income significantly in the next crop year (October – September). The Indian government is also expected to release about 500,000 tons of rice to different states to be sold to retail consumers at around Rs. 1,875 per quintal (about $315) plus transport costs in an attempt to rein in soaring rice prices in the country.

According to government source, it is expected that Russia will lift the import ban on India rice soon, which Russia placed in February 2013, after detecting Khapra beetle infestation in Indian rice.

Vietnam

Vietnam rice quotes declined about 1-4% in June while the Vietnam dong was steady at 21,025 per U.S. dollar. Viet 5% broken rice ended June shown around $370 per ton and Vietnam remains the cheapest of any rice origin.

In an effort to support paddy prices, the Vietnam government is extending subsidized loans to rice processing companies for the companies to buy up one million tons of rice. So far the effect has been lackluster according to locals and the rice has little demand on the export market to due to its poor quality.

Vietnam has exported about 3.5 million tons rice in the first six months of 2013, up about 2.1% from around 3.414 million tons exported in same period last year. The average rice export price in first six months was around $433 per ton, down about 9% from $474 per ton recorded in same time last year. Viet 5% broken rice is today shown around $370 per ton fob. The government is targeting 8 million tons of rice exported in all of 2013.

Pakistan

Pakistan rice quotes increased sharply in June, up about 6% as old crop supplies dwindled. The value of the Pakistani rupee declined about 1% over June to around 99.5 rupees per U.S. dollar. Old crop Pakistan 5% broken rice was shown around $459 per ton by the end of June; new crop 5% (available mid August) was shown around $425 per ton.

Pakistan exported about 2.83 million tons rice during July 2012 – May 2013 of the fiscal year 2012-13 (July – June), down about 16% from around 3.37 million tons exported during the same period in the previous fiscal 2011-12.

In late June, Mexico suspended rice imports from Pakistan following the detection of the Khapra beetle in some rice shipments from Pakistan. Mexican authorities quarantined 3,000 tons of Pakistan rice that was found to be contaminated with Khapra beetle and returned back to Pakistan.

China has been a very important market for Pakistan, especially with India back in the market since 2011. Separately, rice exporters in Pakistan are worried due to sharp hike, about 35% to 75%, in rice import tariffs by proposed by Kenya, as Pakistan is the main supplier of rice to Kenya, exporting about 300,000-400,000 tons to Kenya annually in recent years.

U.S.

U.S. 4% broken rice exports quotes recorded at around $614 per ton in June, down about 2.5%. Physical supplies have dwindled and warehouse receipts for Chicago rough rice futures are being cancelled. Chicago rough rice futures for July delivery settled June at $15.74 per cwt (about $347 per ton) and the July contract was trading at about a 15 cent per cwt (about $3 per ton) premium to the September contract as demand continues to outweigh supplies. Most analysts think that the USDA over estimated supplies and thus prices didn’t rally high enough earlier in the year to sufficiently ration demand creating problems now as the industry struggles to obtain rice to meet its commitments for domestic use and export.

The U.S. has shipped about 3 million ton of rice since the beginning of the crop year starting August 2012. The new crop won’t be available for another couple of months and it got off to a rough/late start.

Brazil

Brazilian rice quotes were steady in June at around $625 per ton while the value of the real declined about 4% against the U.S. dollar to end June around 2.22 per U.S. dollar.

According to Brazil National Grains Supply Company (Conab), Brazil’s paddy rice production is excepted to reach around 11.92 million tons in 2012-13, down slightly from April estimates of around 11.94 million tons, but still up about 3% from around 11.59 million tons produced in 2011-12 as Brazil’s declining acreage was somewhat offset by a sharp increase in Brazil’s average paddy yield in 2012-13. The average rice yield in Brazil in 2012-13 is estimated at around 4.97 tons per hectare, the highest ever on record and up about 4% compared to about 4.78 tons per hectare yield in the previous year.

The Brazilian paddy rice price index maintained by CEPEA advanced about 2% in local currency to end June at 34.06 real per 50 kilograms. However, the declining value of the real against the U.S. meant that in usd the index fell about 7% over the month to the equivalent of about $306 per ton. Locals say paddy supplies are tight and have been difficult to procure.

Argentina

Argentina 5% broken rice export quotes held steady at around $625 per ton. The value of the Argentine peso declined about 2% to around 5.4 per U.S. dollar by the end of June.

Rice farmers in Argentina are choosing to hold on to their crop rather than sell it, as they anticipate the paddy will be worth more in the future compared to the falling peso. In local currency, Argentina rice export quotes are up about 28% from 12 months ago, rising from about 2,601 pesos per ton in June 2012 to about 3,339 peso per ton in June 2013. However, due to the 20% decline in the value of the peso over that same period, in USD terms, prices are only up about 8% from $580 per ton a year ago to $630 per ton today.

According to Argentina Ministry of Agriculture, Argentina exported about 114,054 tons rice in the first quarter of 2013, down almost 13% from around 130,753 tons exported during the same period in 2012.

Cambodia

Cambodia exported 146,854 tons of rice in the period January-May, up 127% from 64,581 tons the same period last year, according to official data from the Secretariat of One Window Service for Rice Export Formality. If Cambodia continues at this pace, export shipments would reach about 350,000 tons by year-end, up from 205,717 tons shipped in all of 2012.

Recently, the Asian Development Bank (ADB) has approved a loans of $55 million to Cambodia to transform the predominantly subsistence rice sector into a commercially oriented industry, while taking care of land and water resources.

China

China’s Ministry of Land and Resources plans to conduct a nationwide survey to find pollution levels in soil across the country to find the reasons behind excessive cadmium content in rice detected earlier this year.

China continues to be a bargain buyer of imported rice due to high domestic prices, according to the China National Grain & Oils Information Center. The Center says that the price of imported broken rice from Vietnam is about 3,100 yuan (about $505) per ton including import taxes and transport costs, which is about 14% lower than domestic rice of comparable quality. While China rice farmers are also worried that they may have to incur losses this year once another bumper harvest is complete in the coming months, as rice from previous harvests is not finding any takers due to low prices of imported rice. According to local sources, the average price of Vietnamese rice in the domestic market is around 3.15 yuan per kilogram (about $508 per ton), and of Pakistan rice is around 3.4 yuan per kilogram (about $550 per ton), both much cheaper than locally grown rice that is sold at around 4 yuan per kilogram (about $645 per ton).

Rice prices in China are high mostly due to high production and rising labor costs. In January, China raised the minimum support price for paddy by about 10% to 2,640-2,700 yuan (about $420-$430) per ton for India rice and 3,000 yuan (about $476) per ton for Japonica rice for 2013. Moreover, a recent report of excessive cadmium content in rice from China’s Hunan province has also boosted demand for imported rice. China is expected to become the world’s largest rice importer in both 2012-13 and 2013-14. According to the USDA, China’s rice imports in 2012-13 are estimated at around 3 million tons, up about 28% from around 2.34 million tons imported in the previous year. China’s rice import demand in 2013-14 is forecast to remain at high levels of around 3 million tons.

Separately, the Organization for Economic Cooperation and Development (OECD) and the UN’s Food and Agriculture Organization (FAO) are expecting that increasing self-sufficiency in rice production and accumulating rice stocks will help China reduce its rice imports in the coming decade through 2022.

According to the combined report by FAO and OECD rice production in China is projected to reach 137 million tons by 2022, down about 1% from the production in the base period (2010-2012) mainly due to shrinking cultivable land and soil quality. Rice consumption is expected to grow to around 140 million tons, but the demand will be partly met by stocks, which are projected to peak to around 105 million tons by 2018 and then decline to around 98 million tons in 2022. The report also said that the per capita rice consumption is projected to decline by 0.2% per year to 76.5 kilogram by 2022 as meat and dairy consumption increases with economic growth of the country.

Philippines

Philippines total rice stocks as of May 1, 2013 stood at around 2.61 million tons, down around 2% from about 2.67 million tons in stocks during the same time last year, which are enough to last for 77 days or up to mid-July, according to data from the Bureau of Agricultural Statistics (BAS). The lean season for rice in the Philippines usually starts in June.

Separately, the Philippine Rice Research Institute (PhilRice) and a rural development organization in the Philippines have signed a memorandum of understanding (MoU) to promote hybrid rice cultivation in the country by providing loans to farmer cooperatives that are involved in inbred and hybrid rice production. Hybrid rice is cultivated in only 3.5% of total rice area of around 4.7 million hectares in the Philippines, and the government has allotted about P500 million (about $12 million) to help increase the hybrid rice area to at least 8% by 2014. The Philippines government is also seeking Thailand’s cooperation to improve rice research in the country. The Philippines’ Department of Agriculture (DA) expects that a technical working group between the two countries could also help boost rice production in the Philippines. According to the Department of Agriculture the Philippines is also keen to share knowledge about rice bran oil technology from Thailand and specialty rice that Thailand grows, including fragrant, glutinous and colored rice varieties for exports. Philippines farmers could also benefit from Thailand’s knowledge in farm mechanization.

Myanmar

In mid-June, the European Union signed legislation readmitting Myanmar to the EU trade preference scheme, allowing Myanmar rice to be imported into the EU duty-free as Myanmar is considered a Least Developed Country (LDC). Earlier to this, Cambodia rice is allowed to be imported into the EU duty-free as an LDC, but will now Cambodia will have to compete more directly with Myanmar for European business.

Africa

According to the USDA, Nigeria’s rice production in 2013-14 is expected to reach a record 3.1 million tons, up about 31% from an estimated 2.37 million tons produced in 2012-13, due to higher acreage and yield compared to flood affected 2012-13. Separately, U.S. environmental analyst Lester R. Brown said Nigera has environmental threat of the rapid desertification on lad due to growing human and livestock population.

The World Bank will provide $108 million support to Cameroon to help the African nation improve disaster-preparedness, overcome losses due to floods and resume rice production in the Far North Region of Cameroon, which has high poverty levels and vulnerable to frequent floods and droughts.

Senegal is targeting to increase paddy rice production to around 1.6 million tons (about 1 million tons, basis milled) in the next five years to achieve self –sufficiency in rice by 2018 under the country’s National Rice Self-Sufficiency Program.

Other Markets

The World Bank will help Bangladesh build a total of one million tons of storage capacity for food grains to help improve food security. Moreover, the country is aiming to increase its rice storage capacity to around 3 million tons by 2020. Separately, Bangladesh is planning to grow fancy rice such as Thailand’s jasmine rice and rice with high amylase content for exports.

In starting of the month, some Sri Lankan media reports that Sri Lanka rice was the second most toxic rice in the world, after Bangladesh, citing an international science journal, but Sri Lankan government has assured that tests conducted both in the country and abroad have confirmed that rice grown in Sri Lanka does not contain excessive levels of cadmium. Separately, Sri Lankan government is also asked to some farmers to produce at least two tons of organic fertilizers each to help reduce dependency on fertilizer imports and to promote healthy rice in the country.

According to USDA post, Russia is expected to import around 230,000 tons in 2013-14 (May to April), up about 15% from an estimated 200,000 tons imported in 2012-13. Separately, Indian government has indicated that it anticipates Russia will lift the import ban on India rice soon, which Russia placed on February 2013 after detecting Khapra Beetle infestation.

Taiwan has developed colored rice (Red, Yellow, Green, and Purple) to help increase the popularity of rice among children and young people. Moreover, Taiwan has banned rice imports from China to prevent any cadmium-laced rice from China entering the country.

2013 Industry Forecasts by USDA and FAO:



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