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World produces another record rice crop

For the fourth year in a row, the world produced a record rice crop. But the increase was due primarily to higher area rather than higher yields. “Yields are virtually flat and we don't see area expanding much more. Yield growth in this century has been very small,” said Nathan Childs, senior rice market analyst, USDA's Economic Research Service, speaking at the USA Rice Outlook Conference in Little Rock, Ark.

China, India, Bangladesh, Indonesia, Sub-Saharan Africa, Thailand and Cambodia are all projected to harvest larger crops. “Bangladesh, India and Sub-Saharan Africa are big importers. They don't want to be dependent on a global market where supplies can be restricted and prices climb to $1,000 a ton. So all of them expanded acreage quite a bit.”

Smaller crops are projected for Vietnam, but that should not have an impact on its exports, Childs says. Burma's crop is smaller due to a cyclone which hit around May 1. Smaller crops are also projected for Iran and Iraq due to drought and in the EU due to insufficient water.

Childs does see global trade picking back up again in the long-term. “We don't see the world moving toward self sufficiency.”

Among exporters, Vietnam, China, Egypt and Pakistan are projected to boost exports in 2009. “Pakistan's exports will be a record by a large margin. Bangladesh is expected to export 4 million tons in 2009. That's a little below Vietnam. India's exports have declined because of a ban on exports. But India has rice and could move rice into the market.”

Among importers, “Sub-Saharan Africa, Southeast Asia and the Western Hemisphere will take more rice. Indonesia, once the largest importer of rice in the world, has reduced imports substantially in recent years, but we expect them to increase imports somewhat in 2009. We don't see them as being self-sufficient in rice.”

Childs projects global consumption to be the highest on record, due to larger world populations. In addition, due to the global economic slowdown, “consumers could shift away from higher priced foods like meat, fruits and vegetable back to rice.”

The idea that there was a shortage of rice in 2008 was not based on solid evidence, according to Childs. “World ending stocks are building, and the 3 percent increase is the largest since 2004-2005.”

Prices for U.S. and Thai rice began to rise in the fall of 2007, noted Childs. “No one had any idea of where they were going. By the spring of 2008, they had climbed to the highest on record. By late April, we hit another record. There was panic buying, a decline in the value of the dollar, record oil prices and export bans and restrictions.

“By summer, prices started to come down, the value of the dollar strengthened and the global economy started to weaken. Rice prices continued to decline and we see prices continuing to decline the rest of the marketing year. But we don't see prices going back to pre-2007 levels.”

In history, Childs noted that “the rice price spike in 1973-74 was caused by a oil embargo, global economic recession, a weak monsoon in India and turbulence in the Middle East. In the 1980s price spike, South Korea had a weak crop due to cold weather, and they imported a record amount of rice. Prices spiked, but dropped rather quickly. In early 1994, Japan came into the market with record purchases after a weak harvest, but by summer, prices were back where they were before the spike. In 1997-1998, an El Nino devastated crops in Southeast Asia and South America. This coincided with a global financial crisis. Prices spiked but by 1999, they were the lowest they had been since the early 1970s.”

Childs projects a slight expansion in world trade in 2009. “The export bans and the very high prices brought world trade down in 2008. Many of the buyers could not afford the $1,000 a ton price and expanded acreage for 2009.”

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