Rice and wheat are food staples for most of the world and remain critical for food security, even though most of the public policy issues in agricultural trade involve other commodities. With the spring planting season beginning in the northern hemisphere, it is a good time to look at those two important crops.
Consumption has to depend on production each year, but carryover stocks at the beginning of the year can provide some cushion for weather and other uncertainties. According to estimates by the Foreign Agricultural Service (FAS) of USDA, global rice stocks at the end of the current marketing year (2014/15) are projected at 97.6 million metric tons (MMT), down 8.9 MMT from last year, the lowest since 94.6 MMT in 2009/10, but higher than the tight carryover stocks of about 75 MMT in 2004/05, 2005/06 and 2006/07.
As usual, China will have the largest carryover at 46.9 MMT, almost unchanged from the previous two years. India will have a decline of 5.9 MMT from last year, and almost 10 MMT over two years, as the Indian government sells off excess government-owned stocks. Thailand will have a decline of 2.0 MMT in government-owned carryover stocks as it unwinds a failed attempt to support domestic prices and lost sales in the international market.
The decline in carryover was caused by a combination of increased consumption and lower production. Domestic consumption has gone up every year since a record small carryover in 2004/05 by a total of 18 percent. Production this year was down at 474.9 MMT after record large crop last year. Even if consumption shows no growth in 2015/16, a record crop would be needed to avoid a further stocks decline.
Trade in rice is relatively small, 9 percent of total consumption, but continues to increase. That can make the market volatile during time of short supply. Thailand is expected to retain its position as the world’s leading exporter for the second year in a row in 2014/15 at 11.0 MMT. It has abandoned its high price policy that led to only 6.7 MMT of exports in 2012/13. India will continue to be the second largest exporter at 9.0 MMT. As noted earlier, India can only maintain that level of exports by drawing down government stocks as production exceeds consumption by only about 3.0 MMT. The world as a whole is using production from previous years to increase current consumption. Vietnam is expected to be the third largest exporter at 6.7 MMT and Pakistan number four at 3.9 MMT. The U.S. is fifth at 3.4 MMT. Exports depend heavily on these five countries that account for 80 percent of 42.6 MMT in exports.
The number one importer will be China at 4.5 MMT. Just four years ago they imported only 0.6 MMT. They also export 0.4 MMT, for net imports of 4.1 MMT. The second largest importer is Nigeria at 3.5 MMT, followed by Iran and the Philippines each at 1.7 MMT. After that there is a host of countries, developed and developing, that are relatively small buyers in the 0.5-1.5 MMT range.
Wheat carryover stocks for the end of 2014/15 marketing year are expected to be large at 197.7 MMT, just short of the recent high set at the end of the 2009/10 year of 210.9 MMT. As with most crops, China is the largest holder of carryover stock at 62.7 MMT, mostly government-held. The U.S. is the largest holder of commercial stock, almost all privately held, at 18.2 MMT followed by the EU at 15.8 MMT. U.S. stocks will be up about 3 MMT and the EU 5 MMT. As with rice, India is exporting excess government held stocks and is expected to have carryover of 16.5 MMT by the end of the year, down from 17.8 MMT last year and 24.2 MMT in 2012/13. Russia is expected to have carryover stocks of 9.1 MMT, up from 5.2 MMT last, but it is uncertain if any of these stocks will be available to the market because the government is trying to hold stocks in the country for domestic purposes.
This year’s global wheat production of 725.8 MMT is just larger than last year’s crop of 716.1 MMT. Since substantial amounts of wheat is grown in low rainfall areas, yields can be quite variable and affect total output. Wheat has an added usage as a feed for livestock and poultry that in an average year accounts for 20-25 percent of global production. The market can draw some of that to food uses in a short crop year. All uses are on a general uptrend and this year should be no exception.
About 22 percent of the global wheat crop is exported each year, more than double the 9 percent for rice and that has been increasing. Total world exports for the 2014/15 marketing year are projected at 160.1 MMT. The EU is expected to be the largest exporter at 31.5 MMT. The U.S. will be second at 25.0 MMT closely followed by Canada at 23.5 MMT. Russia is fourth at 20.0 MMT. Australia rounds out the top five at 17.5 MMT. Note that all the biggest wheat exporters are developed countries. India will have wheat exports of 2.2 MMT, close to its ‘surplus’ of production of 95.9 MMT minus consumption of 93.7 MMT. In 2012/13 it exported 8.7 MMT.
The largest importer in 2014/15 is projected to be Egypt at 10.5 MMT, a position it has continually held in recent years. Indonesia is number two at 7.7 MMT and Algeria is third at 7.1 MMT. Iran is fourth at 6.5 MMT; as recently as 2010/11 it only purchased 0.2 MMT. Brazil rounds out the top five at 6.5 MMT. The top five wheat importers are all developing countries. Japan is the largest developed country importer of wheat at 5.9 MMT.
Wheat is the more food secure market with relatively large end-of-year carryover supplies, production keeping ahead of consumption, large and growing trade, importers have multiple sources of wheat and the capability of shifting wheat from feed use to food uses if needed. Output this year is somewhat uncertain because part of the crop is grown in dry regions where rain is variable.
The rice market is more uncertain. Stock are lower, but not at a critical level. Markets have been balanced in recent years by drawing on India’s government stocks. The current drawdown of Thailand’s stocks may further distort markets. A record crop will be needed to keep pace with growing consumption. Trade is a relative small share of total consumption. Much of the crop is irrigated and not impacted by dry weather.
Many factors can influence production of food grains in a given year. Both of these crops need to be watched each year for weather stress and disease problems as the growing season progresses to give early clues about changes in food security.
Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade & Technology (www.truthabouttrade.org). Follow us: @TruthAboutTrade and @World_Farmers on Twitter | Truth About Trade & Technology on Facebook.