Rice prices at $1,000 per metric ton compared to $200-300 per metric ton for most of this decade have grabbed media attention around the world. The easy explanation is increased production of biofuels like ethanol and biodiesel. A closer look at the numbers shows a global industry at the beginning of a transition that will have major impacts on production, consumption and trade.

These issues are not centered on the U.S. According to USDA estimates, the U.S. accounted for an average of 11.5 percent of world exports of rice for calendar years 2004 through 2007 and is projected at 12.7 percent for 2008. U.S. exports will increase to 3.5 million metric tons (MMT) while world total exports decline to 27.5 MMT. U.S. rice acreage in 2008 is expected to be 2.77 million acres, up slightly from 2.76 million acres in 2007, but small in comparison to U.S. acreage for corn at 86.0 million, soybeans at 74.8 million and wheat at 63.8 million. U.S. rice plantings were 3.38 million acres as recently as 2005, and the decline in acreage in 2006 preceded the price increases for corn that began in the fall of 2006. These changes in U.S. rice acreage and exports are not sufficient to drive fundamental changes in world markets.

As with most crops, China has a major role in rice production and use and a minor, and changing, role in rice trade. In the 2007-08 marketing year China accounted for 19.2 percent of world rice plantings and produced 129.5 MMT of rice, 30.4 percent of world production of 425.3 MMT. Chinese consumption is expected to be 127.0 MMT, 29.9 percent of world use of 424.2 MMT. In recent years China has imported about 0.5 MMT of rice per year while exporting about 1 MMT, down from 3 MMT per year as recently as the late 1990s. China has increased export taxes to stop new export sales.

The largest rice exporter is Thailand at 9.0 MMT for 2007/08, 32.7 percent of world exports, down 0.5 MMT from 2006/07 and up from 7.3 MMT in 2004/05 and 2005/06. Thailand’s peak export year was 10.1 MMT in 2003/04. Rice production in Thailand was a record 18.5 MMT in 2007/08 and consumption is expected to be flat at 9.6 MMT. Thailand continues to monitor export sales. Vietnam is the second largest rice exporter at 4.0 MMT, 14.6 percent of the world total, and down from 4.5 MMT in 2006/07, 4.7 MMT in 2005/06 and 5.2 MMT in 2004/05, the peak of a 15 year export spurt that began at 1.0 MMT in 1990/91 and coincided with an almost doubling of rice production. Domestic consumption in 2007/08 is expected to increase by 1.0 MMT to 19.7 MMT. Vietnam has imposed export restrictions.

It may be surprising that the fourth largest rice exporter is India at 3.0 MMT, 10.9 percent of the world total, and down from 5.0 MMT in 2006/07, 4.5 MMT in 2005/06 and 4.7 MMT in 2004/05. India exported 6.3 MMT in 2001/02. India’s production of 94.0 MMT in 2007/08 is record large and the third good crop in a row. Domestic consumption is also at a record of 90.4 MMT and up from 80.7 MMT in 2004/05. The Indian government is battling consumer price increases that are averaging 7 percent per year and has announced export restrictions on rice. With concerns about food supplies and national elections in May 2009, India may not return to the export market.

Pakistan is expected to be the fifth largest exporter in 2007/08 at 2.9 MMT, 10.6 percent of world exports, up from 2.4 MMT in 2006/07, but down from 3.6 MMT in 2005/06 and 3.0 MMT in 2004/05. Before that, exports averaged about 2.0 MMT per year. Production for 2007/08 was 5.4 MMT, up from 5.2 MMT in 2006/07 and just off the record production of 5.5 MMT in 2005/06. Domestic rice consumption is stable and stocks are adequate.

Compared to other major crops, relatively little rice, 6.5 percent, is traded in global markets. That compares to 17.9 percent for wheat, flour and products, 12.4 percent for corn and 34.2 percent for soybeans. If China and India are removed, rice trade of the remaining countries is 11.6 percent of production. China and India produced 223.5 MMT of rice, 52.6 percent of world production, and have 4-6 MMT of exports, 1.8-2.7 percent of their combined production and 14.7-21.8 percent of world trade. China and India are also expected to have 49.7 MMT of carryover stocks at the end of the current marketing year, 64.4% of the world total. The other major exporters will have total end of year stocks of only 4.7 MMT.

With large populations, strong economic growth and internal food price pressures, China and India could quickly disappear from the rice export market. Thailand, Vietnam and the U.S. are more committed to export markets. What happens in Pakistan will be driven mostly by the availability of other food grains in the country. Enough uncertainties exist about export supplies to make importers rightly nervous about long-term trends.

These uncertainties are coming at a time of record large global production, but this occurred by increased acreage due to rising prices in recent years rather than by increasing yields on existing land. Yield increases are needed at a time of strong demand and fewer export participants. Some importers are already talking about creating incentives for more domestic production. The Philippines, the largest importer at 1.9 MMT, has plans to encourage output. Indonesia has a record crop and is limiting exports to keep the supply available to avoid imports. The EU and Saudi Arabia lack natural resources and climate to increase production, but can afford to shift to other foods. Smaller suppliers with additional land area may fill some of the gap.

Most of the current price problems are related to exporters withdrawing supplies from the market and the general rise in all commodity prices. The longer-term structural question of who will produce rice for international markets will continue to influence market prices for years to come.