World rice prices, which have seen large increases since August/September 2007, showed some dramatic gains in recent months, on concerns over immediate supply as major exporters look to export restrictions and tariffs to secure domestic supplies. CBOT rough rice has risen around 60% since January, to a record high of over $1180 /t, and supply is expected to remain tight until new crop supplies.
Outlook for 2007/08 - Latest USDA figures forecast world rice production at a record 425.3Mt (milled basis). Consumption, is seen to increase nearly to 424.3Mt, World stocks remain low, at around 18% of production close to the lowest ratio since 1976/77.
Although the tight supply situation has led to price increases, international organisations have expressed concern that an immediate supply response to these high prices will be difficult in view of the limited availability of extra land suitable for rice cultivation and no immediate prospects for significant yield increases. There are also concerns about an increase in hunger and poverty arising from the high prices, as rice is the main staple for the poorest sections of society in Asia and some parts of Africa.
Main Exporters - Production of rice is geographically concentrated in Asia which accounts for over 90% of world production.
China is by far the largest rice producer in the world, and plantings have increased in response to the higher prices. Production for 2007/08 is forecast to rise from 127.8Mt last season to 129.5Mt. The USDA forecast for rice exports from China has recently been lowered by 0.6Mt to 1Mt, following the government decision to tax rice exports.
India, which is the second largest producer, is forecasting a slightly larger crop than last year, at 94Mt (93.4Mt last year). The government of India has imposed a ban on exports of non-basmati rice below a FOB price of $500 /t). Exports for 2008 are seen down from last season's 3.8M to 3Mt. Since India is the third largest rice exporter in the world, a continued export ban would have a significant effect on prices.
Thailand, which is the world's largest rice exporting nation, is also expected to increase production due to favourable weather conditions, from 18.3Mt last season to a record 18.5Mt. Thai rice prices are used as the benchmark for world price levels, and exports were particularly heavy during late 2007 due to limited exports from other countries. Thai export prices are now the highest since 1981.
Vietnam, the second largest exporter, is also expected to have a record rice crop of 23.3Mt, due to high yields. Exports are forecast at 4Mt in 2007/08, down from 4.6Mt in 2006/07, due to export restrictions.
Outlook - Price volatility is likely to continue in the rice market this season while supplies remain tight and governments impose their own limits on tradable quantities. In the longer term, an appropriate supply response to the continuing increase in worldwide demand will depend on technological breakthroughs with regard to productivity of rice crops, and their tolerance to different growing conditions.
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