According to USDA estimates, Indian rice production has averaged 96.4 million metric tons (MMT) of milled rice over the past three years; this year’s crop is now estimated at 84.0 MMT. Consumption has averaged 90.1 MMT for the last three years, record large in each year, with 2008/09 estimated at 93.2 MMT. For 2009/10 consumption is estimated to decline to 89.5 MMT. Rice exports by India are expected to decline to 1.5 MMT, down from record exports of 6.3 MMT in the 2006/07 marketing year. India’s carryover stocks will decline from a record large 17.0 MMT at the end of 2008/09 to 10.0 MMT for 2009/10, the lowest carryover stocks for the last five years, but still 1.5 MMT higher than in 2004/05. Given that rice is a stable food and consumption has been increasing rapidly, the government may not risk having rice stocks decline to 10.0 MMT.
Over the last three years the Philippines has been the world’s largest rice importer averaging 2.1 MMT per year. Projections for this year put imports at a record large 2.4 MMT. Production in the Philippines has averaged 10.3 MMT per year over the past three year, and the current crop was estimated at 10.7 MMT in early October. Consumption has averaged 13.0 MMT over the past three year, but has grown from 10.4 MMT in 2004/05 to a projected 14.0 MMT in 2009/10. Carryover stocks were estimated at 4.1 MMT in 2008/09 and are expected to be drawn down to 3.2 MMT at the end of 2009/10, down from the recent high of 5.3 MMT in 2005/06.
World rice carryover stocks were 90.7 MMT at the end of the 2008/09 marketing year, 20.8 percent of consumption and the highest carryover of the last five years. That number is misleading because 46.5 percent of the stocks are held by China and their recent export high was only 1.3 MMT in 2006/07, with 2009/10 exports projected also at 1.3 MMT. China could export more because USDA projects its carryover stocks at 44.8 MMT for 2009/10, up from 42.2 MMT at the end of 2008/09 and 37.6 MMT in 2007/08. They are expected to harvest a record 136 MMT crop, but may choose to not draw down stocks for one of its starch staples.
Thailand is the world’s largest exporter with 2009/10 projected at 10.0 MMT, equal to its record exports in 2007/08. Exports by Vietnam are projected at 5.5 MMT, just off its 2008/09 record. Pakistan’s rice exports are expected to be 3.3 MMT, up from 3.0 MMT for each of the last two years and off its recent high of 3.6 MMT in 2005/06. Exports by the U.S. are projected at 3.1 MMT for 2009/10, just under last year and the second lowest of the last six years. U.S. and Thai carryover stocks are expected to be up 0.5 MMT and 0.4 MMT, respectively, indicating they could export more if needed. Thailand has large government stocks of 7.0 MMT that could be released to the market to make room for another anticipated record harvest and meet the extra export demand. Vietnam also had a record large 2009 crop and could increase exports to record highs.
Estimates in the market put Indian rice imports at 1.0 to 3.5 MMT; India normally imports no rice or only insignificant amounts. Indian rice prices have increased 70 percent this year as the short monsoon season and then floods have reduced this year’s crop. The government is interested in keeping food costs down for its lowest income citizens. Note that the top end of the Indian import range is higher than the three-year average imports of 2.1 MMT by the Philippines and anticipated 2009/10 imports of 2.4 MMT. As was true in the first half of 2008, rice supplies are adequate to meet the additional demand if other importers and exporters do not alter traditional buying and selling patterns.
The increased demand for rice may spill over into the wheat market where the International Grains Council expects the 2009/10 crop to be only slightly smaller than the record large 2008/09 crop of 687 MMT. In some assistance programs and consumer markets, wheat can substitute for rice at the right relative market prices.
Market prices in Thailand which accounts for about one-third of the rice trade have yet to respond to the expected new demand. Export prices for 100 percent Grade B rice in late October as reported by the U.S. Agricultural Attaché in Thailand averaged $508 per metric ton (MT), unchanged from a week earlier. That was about half the $970 per MT average weekly price for mid-May of 2008, but more than double the $205 per MT average for the first half of the decade. Prices for 100 percent grade B rice averaged about $600 per MT in late June and early July and slowly declined to late October’s $508 per MT. This decline in price came at a time of heightened expectations of increase demand from India and the Philippines. Domestic stocks policies in Thailand and the large new crop being harvested overshadowed the changing world market forces. The Chicago Board of Trade November rice contract is now at its highest level since early January of this year.
How governments in rice importing and exporting countries respond to increased market demand will determine what happens in the markets. In late 2007 and early 2008 Vietnam and India imposed export restrictions when the Philippines entered the market for additional rice purchases. Now the Thai government has large stocks purchased to support prices that could be released for exports.
The global rice market is learning how to respond to market supply and demand factors. Less government intervention in importing and exporting countries would be helpful, but that will take time. Government intervention in the rice market is the natural response when demand or market prices change more than “politically acceptable.” Politicians will slowly learn that more open trade is helpful in achieving adequate supplies at reasonable prices rather than manipulating trade to achieve short-term political outcomes.