Nathan Childs
Nathan Childs, USDA Economic Research Service, discusses domestic and global rice outlook at the USA Rice Outlook conference in San Antonio

Tight supplies and higher prices expected for 2017-18 rice crop

Tight supplies indicate higher rice prices for 2017/18; building stocks will mean lower prices for 2018/19

U.S. rice farmers can expect tight supplies and higher prices for the 2017-18 crop year and will respond with increased acreage and anticipated higher production, assuming normal conditions.

The latest World Supply and Demand Estimate report, released Dec. 12, indicates U.S. rice acreage will be up 17 percent in 2018, up to 2.9 million acres. Estimates show a 3 percent yield increase — assuming normal growing conditions. Carry-in for both long-grain and medium-grain rice shows a sharp decline from 2017-18 and below recent five term averages.

Production will increase almost 24 percent from the 2018-19 crop, up to 224 million hundredweight, mostly from long-grain rice at a 28 percent increase to 161 million hundredweight. Medium- and short-grain estimates show a 13.5 percent jump to 59 million hundredweight.

Imports will increase slightly, up 0.8 percent, from Asian aromatic rices. Total U.S. rice supplies are expected to increase more than 10 percent, which sets up a likely price pullback for 2018-19.

Lower Prices for 2018-19

Prices could decline by 20 cents a pound, for the 2018-19 crop. “Farm prices for both classes of rice in the South and in California are projected to decline in 2018-19, mostly due to the much larger U.S. supplies,” says Nathan Childs, Economic Research Service, USDA.

Childs, speaking at the closing session of the USA Rice Outlook Conference in San Antonio, Dec. 12, reporting on numbers fresh off the World Supply and Demand Estimates report released shortly before he spoke, said U.S. ending stocks are expected to show a substantial increase in 2018-19, with long-grain accounting for most of the production increase.

Global supply also increases, Childs said, in spite of some production setbacks. “Global supplies increase to a record 621.5 million tons, a result of a 4 percent larger carry-in,” he explained. Global production was down 0.7 percent from the 2017-18 record, at 483.5 million tons (milled basis).

Production shortfalls occurred in Bangladesh, Brazil, Egypt, India, Japan, the Philippines, South Korea, and the United States, and more than offset larger production in Burma, China, Sri Lanka, Thailand, and Vietnam, Childs said.

Harvested area is projected down by 600,000 hectares from 2017-18 to 160.2 million hectares. Bangladesh, Egypt, India, Philippines, and the United State all harvested less area, which “more than offset expanded rice area in Burma, Cambodia, Thailand, and Sri Lanka.”

Weather and Other Factors

He cited several reasons for reduced rice area, including low prices at planting for U.S. growers, followed by weather issues — heavy rain and flooding early and a hurricane on the Gulf Coast late. Other countries lost production to flooding and drought; strict area controls in Egypt resulted in a switch to corn and cotton, and expectation of increased imports precipitated a decrease in the Philippines.

U.S. production dropped by 20.4 percent. Sri Lanka increased production by 45.2 percent. China is up 0.8 percent.

Thailand, Sri Lanka, China, Burma, and Cambodia are increasing rice production area.

Childs said global rice supplies for 2017-18 are expected to be a record high, supporting prediction of lower prices. “Continued high producer price support in China increased area 4,000 hectares, despite huge stocks and record imports.”

Global consumption is also down, Childs said. “At 480.8 million tons, global consumption (including a residual) is 600,000 tons below the 2016-17 record and 2.7 million tons below 2017-18 production. Indonesia, Thailand, and the United States account for most of the expected decline in global consumption (including a residual component) in 2017-18.” China, Egypt, India, Sub-Saharan Africa, and Vietnam will increase rice consumption.

Global ending stocks for 2017-18 will rise 2.7 million tons from 2016-17 figures and will be the highest since 2000-01.

The China Syndrome

As with other commodities, China is the overriding dynamic, holding more than two-thirds of the global ending stocks for 2017-18. Ending stocks for the top five exporters, India, Thailand, Viet Nam, United States and Pakistan, are down.

Childs says Nigeria, Sri Lanka and Iran are expected to import less rice in 2017-18.

The export market is significant for rice with 9 percent of global production traded annually. “That’s double the share of 25 years ago,” Childs said. Thailand and India are expected to be top rice exporters in 2017 and 2018, and Burma is back in the export business with the highest anticipated rice export since before World War II.

Childs said China had backed out of the rice export market for about a decade but has re-entered, “and now China exports more than 1 million tons of rice, and is also expected to remain the largest rice importing country, followed by Nigeria,” which is a distant second.

Childs says the U.S. faces difficulty trading with Asian countries because of the price differential, about $150 a ton, with other exporters.

Latin America Top Market

The Western Hemisphere is the U.S. rice market. “Latin America typically accounts for about 60 percent of U.S. rice exports.” The figure would be higher, Childs said, if he included Canada.

Exports are projected to decline in 2017-18. “Through Nov. 30, U.S. all-rice exports were 9 percent below a year earlier, with rough-rice responsible for most of the decline. U.S. long-grain exports were 9 percent above a year earlier, with milled rice accounting for all of the increase.”

Childs sees some good news from exports estimates. “Through Nov. 30, U.S long-grain sales and shipments to Iraq, Haiti, and Mexico were well ahead of a year ago,” he said. “But medium- and short-grain sales were well behind last year to northeast Asia, north Africa, and the Middle East.”

Other factors affecting 2018-19 markets include:

• Big increase projected for total domestic and residual use, mostly due to a larger crop.

• Long-grain accounts for the bulk of the expected increase in domestic use.

• Increased exports of both classes of rice, with medium- and short-grain increasing at the fastest pace.

• A substantial increase in U.S. ending stocks, with long-grain accounting for the bulk of the increase.

• Farm prices for both classes of rice in the South and in California are projected to decline in 2018-19, mostly due to much larger U.S. supplies.

 

Childs says several factors could affect U.S. rice exports, including:

• Will Venezuela remain a top buyer of U.S. rice? Venezuela has been a critical market for U.S. rice in recent years, despite political turmoil.

• Will competition from South American exporters in Mexico and Central America increase?

• Any additional U.S. sales to Iraq?

• Any U.S. sales to Iran?

• U.S. sales to China?

• Will Turkey and Libya return as buyers of U.S. rice?

 

Childs and other market observers at the conference say overproduction from the 2018 crop could have an even greater negative impact on prices.

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