The Rice Market Monitor provides an analysis of the most recent developments in the global rice market, including a short-term outlook. Presently, the full document is available only in English but highlights are available in Spanish and French.

June 2007, Volume X - Issue No. 2

FAO's March forecast of global paddy production in 2007 has been raised by 5 million tonnes to 638 million tonnes, which would represent a mere 1 percent increase from 2006. So far into the season, only countries situated in the Southern Hemisphere have harvested their main 2007 crops, the results of which have been rather disappointing. While there is still much uncertainty surrounding the outcome of the season in the northern hemisphere countries, relatively high prices are anticipated to boost their production, assuming an average weather pattern.

Much of the growth in world output would be accounted for by Asian countries, now anticipated to gather 580 million tonnes, 8 million tonnes more than in 2006. Sizable gains are foreseen in Bangladesh, China, India, Nepal, Pakistan and Thailand, while Indonesia, Japan, the Republic of Korea and Sri Lanka may incur a decline.

Prospects are positive in Africa, where 22.1 million tonnes of paddy rice are expected to be gathered, up from 21.6 million tonnes in 2006. Output is expected to increase in Madagascar, Nigeria and Guinea, while it might fall in Burkina Faso, Cote d'Ivoire and Mali. Following the generally good crops harvested last year, the broad food situation appears to be relatively favourable at a time when many countries are heading towards the lean season.

Adverse weather conditions and competition from other crops may result in a 2 percent decline in paddy production in Latin America and the Caribbean (LAC) to 24.2 million tonnes. The drop is expected to stem from a negative performance in South American countries, in particular Brazil, which faced water constraints at planting time, but also in Argentina, Chile, Ecuador, Peru and Uruguay. By contrast, the outlook is positive for countries in Central America and the Caribbean, especially Cuba, but also Costa Rica, the Dominican Republic and Mexico.

In the rest of the world, prospects are rather mixed, as production is set to fall in the United States and Australia, while it may increase in the Russian Federation, following a strengthening in border protection. Output by the European Union (EU) is unlikely to change much from last year.

FAO's forecast of global rice trade in 2007 has been raised to 30.2 million tonnes, almost 1 million tonnes, or 3 percent, above 2006 and a new record. The increase would result from a strengthening of import demand, with larger volumes flowing to Bangladesh, Indonesia, Cuba, Brazil, the EU and the Russian Federation. By contrast, imports to the Islamic Rep. of Iran, Iraq, Malaysia and the Russian Federation may fall. Overall, less rice is also expected to be imported by African countries.

Much of the expansion in world trade this year is expected to be met through larger exports from Cambodia, China, Egypt, Myanmar and Thailand. By contrast, limited supply and high domestic prices are likely to depress sales of Argentina, Australia, Brazil, India, Pakistan and the United States.

The FAO estimate of world rice inventories at the close of the 2006/07 marketing seasons has been raised from the March figure by about 2 million tonnes to 104 million tonnes. This would still represent a draw-down from their opening level of 106 million tonnes, an indication that global production was not sufficient to fully meet consumption. Rice inventories are estimated to fall in importing countries such as Bangladesh, Brazil, Indonesia, the Islamic Rep. of Iran, Nepal and Senegal but also in India and Viet Nam. However, they may rise strongly in China. Preliminary forecasts for closing rice inventories in 2008 point to a small recovery to 105 million tonnes, with much of the increase again concentrated in China, while further cuts are expected in Australia, Bangladesh, Brazil, India, Indonesia, the United States and Viet Nam.

International prices have remained on an upward trend since March, as reflected by the FAO all rice price index, which averaged 123 in June, up from 120 in March. The price strength dominated the various rice market segments, with the exception of Japonica rice. Prices of aromatic rice, in particular, have continued to surge, a reflection of scant export availability, with the corresponding index gaining 8 points since March and 14 points since January. On average, world rice quotations are estimated to have risen by 14 percent since June 2006. Prices are expected to remain steady at least until October - November, when several important northern hemisphere countries will be harvesting their main crops. Among the various areas of uncertainties, one concerns import demand by Indonesia, the withdrawal of which would have serious negative effects on quotations. International rice prices will also be influenced in the next few months by the pattern of the monsoon, exchange rate movements and transportation logistics.