Current Situation of the Rice Market and Medium Term Outlook
Agricultural commodity markets have been under close scrutiny since the 2008 price surge episode.
One positive effect of that event, is that the international community‘s attention has turned back to agriculture
after many years of neglect.
The 2008 price crisis mirrored a number of underlying factors, related to the market own supply and
demand fundamentals but also to external developments, including the prices of competing commodities and
the price of crude oil, exchange rates movements, the world economic downturn, and policies implemented by
major rice players. While the high volatility of rice prices manifested in 2008 largely subsided, international
rice prices have yet to return to the pre-crisis levels. Whether they can do it in the short term or in the medium
term is a fundamental question many would like to have the answer.
Over in the next decade, more fundamentals questions will arise that may affect the rice economy and
the ability of the world to feed its population. Among the various challenges that will need to be addressed
stand climate changes, resource constraints, technological progress and dissemination, demographics, changes
in diets and, last but not least government policies.
Market Situation and Short Term Outlook
What are the prospects for the international rice economy in the short term? In spite of severe flooding
undermining crop prospects across Asia again this year, especially in Thailand, expectations of bumper crops
in the five major producing nations are forecast to boost world rice production in 2011 to a new record. If
confirmed, world rice output this season will be up by 3.0 percent and more than sufficient to meet
consumption needs, even allowing an accrual of world rice reserves for the eighth consecutive year.
Major production gains are expected in Asia, in particular in China and India, which together account
for more than 80 percent of production. Bangladesh and Viet Nam, the fourth and fifth world rice producers,
are also heading towards record harvests. Indonesia, which ranks third among producers, had until recently
also announced a record 2011 output, but it recently downgraded its forecast, on 1 November. According to
the latest figures, the country faces a 1 percent contraction in production from 2010. Although well below
target, it would still be the second highest on record.Stronger import demand by countries in Asia and Africa has sustained the expansion of international
trade to a new high in 2011. As for next year, prospects for good crops in some key importing countries may
translate into a small decline in trade volume. However, recent policy changes by two of the key market
players, Thailand and India, have heightened market uncertainty. In the case of Thailand, the recently elected
Pheu Party already promised higher prices to rice farmers when running its campaign. Being elected, it
already started implement
Global rice utilization is predicted to increase by 2.1 percent in 2012, driven by larger food demand. On
a per capita basis, this is expected to rise slightly to 56.8 kilos per year, in spite of prevailing high, or even
rising, retail prices in many countries, which have triggered a series of government responses to keep food
inflation in check. Damage to rice held in storage caused by floods in several Asian countries since August
also boosted post-harvest losses and hence, rice uses other than for food or feed.
International rice prices have resumed an upward trend since June 2011, reflecting first a tightening of
the market and, subsequently, the announcement of a new high price policy by Thailand, plus concerns about
the effects of the South East Asia floods on export availabilities and shipping logistics. India’s relaxation of its
export ban on regular rice contributed to dampening the upward pressure on world prices in October, but also
caused much uncertainty on their future direction.