The global rice market: boom or doom?

  Samarendu Mohanty   |  
A lowland rice farmer from Savannakhet Province in Laos threshing rice after the harvest. Photo: Danielle Marichal

A lowland rice farmer from Savannakhet Province in Laos threshing rice after the harvest. (Photo: Danielle Marichal)

 The global rice market is on the move again. In the last few months, rice prices have climbed back up after hitting a 2-year low in early August. The global rice price, represented by Thai 5% broken, had increased by $120 per ton as of 2 December from its August low of $434 per ton—an increase of nearly 30% in 4 months (see Fig. 1). The damage caused by inclement weather on the wet-season rice crop in Pakistan and in other rice-growing countries (Thailand, Myanmar, the Philippines, China, and South Korea) and supply concerns surrounding wheat and maize have provided the necessary spark to reverse the downward trend in the market. Pakistan’s rice crop, in particular, has been battered by floods—and the most recent USDA estimate points to a significantly lower production of 5.1 million tons compared with 6.8 million tons in 2009.

On the positive side, Australia is recovering from its multiyear drought, during which the rice crop more or less disappeared in the last 5 years, but it is projected to produce more than 500,000 tons this year or nearly 300% greater than 2009-10 production.

The most recent USDA estimate now puts global rice production at 451 million tons, that is, 9 million tons lower than what was expected a few months ago.

Nevertheless, this is still a good harvest considering it is 10 million tons higher than what was produced last year. This year, however, the consumption forecast is above 450 million tons; hence, this leaves nothing for inventory for the first time in 5 years.

Given the tightening of the current global supply-and-demand situation, some strengthening of rice prices was inevitable. Nothing, though, can truly explain such a steep rise in price within just a few months. This was echoed at the International Rice Policy and Investment Conference (IRPIC) held in conjunction with the Third International Rice Congress (IRC2010) in Hanoi, Vietnam, on 8-12 November (see The rise of rice and Rice for future generations).

More significantly, however, the important question is, Where do prices go from here? As mentioned many times in my previous Rice Today articles, nobody can predict future rice prices. If somebody says he can, he is lying. Based on my “guesstimate,” further downward revisions of the global rice and wheat supply may provide the necessary support for rice prices at this level, or even take them a little higher. But, Thailand and India can spoil the party and, in fact, exert downward pressure on the price if they decide to unload part of their procurement and mortgage stocks to open up storage space for the new crop.




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