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Rice industry outlook 2018

  • Major rice producers and consumers
  • Global rice trade
  • Factors dominating the trade

 

Rice is the 3rd largest produced agricultural commodity in the world, after sugarcane and maize. This is also the most widely consumed staple crop, especially in Asia. Presently, the global harvested area under rice cultivation is 160 million hectares.

Moreover, the global rice production and consumption moves in tandem. The production is expected to increase with a CAGR (compound annual growth rate) of 1.24% from 417.86 MMT ([Million Metric Tonnes], [2006]) to 484.71 MMT (2018). Similarly, the consumption is also expected to increase with a CAGR of 1.28% from 412.26 MMT (2006) to 480.49 MMT (2018).

 

China is the topmost rice consuming nation, but holds the second place as far as the area under rice cultivation is concerned, the nation roughly has 30 million hectares of rice cultivation. This is lower than India’s but is greater in terms of rice production on the back of higher yield, which is due to better irrigation facilities. Additionally, China’s rice yield is 6.91 MT/ha (metric tonne/hectare), this is much higher as compared with the world average of rice yield at 4.51 MT/ha. Thus, this make China, the largest producer of rice. The country is also the biggest consumer of rice. It accounts for almost 30% of the world’s rice production and consumption, respectively.

China’s production is anticipated to increase at a CAGR of 1.21% from 126.4 MMT (2006) to 146 MMT (2018), whereas its consumption is projected to increase at a CAGR of 1.04% from 128 MMT (2006) to 142.45 MMT (2018). Notably, during 2012-13, China’s rice imports increased by 231% and 76% on a YOY (Year Over Year) basis. This was mainly on account of low international prices of rice as compared to the government regulated support price. Secondly, the imported rice from Vietnam, Thailand and Pakistan was of much better quality. This benefited the exporting nations, mainly Vietnam, Thailand and Pakistan and led to increase in their exports. In 2018 imports are expected to decline due to narrowing of arbitrage opportunity from imports and restrictive measures by the government of China on exports.

India is the largest exporter as well as the second biggest producer and consumer of rice. The nation also has the largest area under rice cultivation, which is 42.7 million hectares and is expected to have a yield of 3.78 MT/ha (2018). The low yield in India is on account of rain fed agriculture and poor irrigation system. In addition, farmers grow multiple crops in a year on the cultivated land and hence, per day productivity of most crops is lower in comparison to the global average. India is one of the largest consumers of rice and rice is mainly consumed as a staple food by more than 70% of the population, but the per capita rice consumption has been declining in the nation. This decreased from 77.9 kg per person (2006) to 75.1 kg per person (2017) due to the growth in Indian economy which accounted for an increase in the purchasing power that led to a diversification of diet. This further resulted in the inclusion of highly nutritious food. In 2011, after the withdrawal of the ban on the export of non-basmati rice by the Indian government, the nation emerged as the largest exporter of rice and exports were expected to increase at a CAGR of 23.3% from 2.8 MMT (2011) to 12 MMT (2018). Indian rice became very competitive in the global market and importing regions like Africa shifted to Indian rice for imports due to lower prices in comparison to other nations. This may increase the international market share for India from 7.9% (2011) to 24.4% (2018). India mostly exports to Iran, Saudi Arabia, Nigeria, Bangladesh, Sri Lanka, South Africa, etc. There was a slight decline in exports in the recent years due to a low export demand. This was because of the following reasons:

  • A decrease in exports to Iran due to withdrawal of sanctions by the United States and five other nations in 2013, which led to a positive impact on the economy of the nation. Furthermore, it also led to establishment of new trade channels. Hence, increased the competition for Indian basmati rice, which was the 2nd most expensive rice in 2013.
  • A decrease in exports to neighbouring countries; Bangladesh and Sri Lanka owing to increase in import duties on rice.


The exports are expected to improve in the near future as the international demand is on a rise and low rice production is estimated for FY 2018, this will affect prices of rice. In addition, Iran has lifted the import ban on rice, all these factors will contribute to an upward trend in the Indian rice prices. 

Bangladesh is the third largest producer and fourth largest consumer of rice. The country’s per capita rice consumption is very high and stands at 196.6 kg/person. The area under rice harvest is 11.3 million hectares with an expected yield of 4.38 MT/ha (2018). Bangladesh’s rice production is likely to increase at a CAGR of 1.15% from 28.76 MMT (2006) to 33 MMT (2018) and consumption is projected to increase at a CAGR of 1.63% from 29 MMT (2006) to 35.2 MMT (2018). This is mostly sufficient to meet the local demand.

Vietnam is the fourth largest producer and the third biggest exporter of rice. The nation has a rice harvest of 7.73 million hectares with a projected yield of 5.89 MT/ha (2018). Vietnam’s rice yield is also above the global average just as China’s. The International Rice Research Institute (IRRI) of Vietnam played a significant role in improving the yield and quality of rice. The rice production is expected to increase at a CAGR of 1.87% from 22.77 MMT (2006) to 28.45 MMT (2018). The nation accounts for 14.2% of the global rice trade (2018), it exports to Asia, Africa, Europe, America and Australia.

Thailand is the second largest exporter of rice. In 2012, Thailand’s rice exports increased, but its international market share declined from 30.3 to 17.4 percent on account of the price competition from India. This was on the back of India’s removal of the ban on its non-basmati rice exports in 2011. Indian and Vietnamese rice was nearly 120 USD/MT (2012) cheaper than the Thai rice, which led to a decline in rice exports from Thailand. Further, Thai rice exports were also affected by the decline in imports from one of its major importers Nigeria as higher import tariff was imposed by the government. This led to reduced imports of rice by Nigeria, which resulted in a CAGR of 10% from 3.2 MMT (2012) to 2.1 MMT (2016).  

However, Thailand’s rice exports improved (2017) due to the sale of the government-owned stock and suspension of off-season rice paddy pledging program in 2013, this made the Thai rice prices more competitive than the Indian and Vietnamese rice. It is anticipated that Thailand rice exports will decline in 2018 due to depletion of government’s rice stock in 2017.

 

In conclusion, it can be stated that there is a cut-throat competition between Asian countries for the market share in the global trade. Hence, for non-basmati rice, there is a stiff competition between India, Thailand, Vietnam and Pakistan, whereas for basmati rice there is a competition between India and Pakistan. The United States exports long grain and medium grain rice to Asian and African countries and compete with Australia on the export of medium grain rice.

Significantly, prices play a decisive role in the export market share of rice as importing nations shift to countries offering a competitive price. The export price of rice quoted by an exporting nation is dependent on several factors including production cost, yield, the minimum export price set by a government of a country and availability of rice after the government purchase program. The export market share is also affected by the import tariff implemented by a nation to safeguard the interest of domestic farmers and a variety of rice preferred in a specific region. There has been an increase in export quotes by the major exporting nations as there has been an increase in the demand from importing nations. It is projected that in 2018, the global rice production will be lower than the previous years due to less production in India and Bangladesh. The global consumption will increase but would be less than the production. The overall global trade might decrease as exports are estimated to decline in major exporting nations, Thailand and the United States. Therefore, on account of anticipated decrease in rice production and increase in demand in the international market, the prices are most likely to increase in 2018.

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