New York, New Yrok
April 21, 2008
Two years after questions arose
regarding the viability of the U.S. rice industry, the sector
has emerged stronger and has a very promising outlook with total
U.S. rice exports forecast to increase around 20 percent,
according to a new
Rabobank report, "U.S. Rice."
"The outlook for U.S. rice growers remains strong, with more
cause for optimism than concern. However, with global rice
stocks already at low levels, prices are especially susceptible
to any shocks," said Food & Agribusiness Research and Advisory
Vice President Michael Whitehead. "Adverse weather in a
particular rice-growing region could be one cause of price
increases, while a potential cause for a significant drop in
rice prices would be a perfect storm of excellent and unimpaired
growing conditions in the major producing countries."
Production
Despite attractive prices of alternative crops, U.S. planted
rice acreage fell only 3 percent in 2007/08. This differed,
depending on the class of rice, with medium/short-grain rice
production up approximately 16 percent on the previous crop
year, while long-grain rice was down about 3 percent.
Globally, rice production is forecast to hit a record 423
million metric tons (milled basis) in the 2007-08 crop year. In
China, the largest producer of rice, production is likely to
remain steady because there have been major productivity gains
from super-high yielding plants despite some drought conditions.
Many growers in Vietnam are also likely to see production levels
unchanged. However, in Thailand, the largest exporter of rice,
improved yields through good weather are likely to see
production increase to 30 million metric tons in the 2007-08
crop year.
Global Exports
Total U.S. rice exports for 2007/08 are forecast to increase
approximately 20 percent from the previous year -- in part due
to export restrictions imposed by Vietnam and India. In the
United States, rough rice exports largely destined for Mexico
and Central America, are forecast to improve 14 percent from the
previous year. Additionally, U.S. milled rice exports are
forecast to jump 25 percent; although still 10 percent below the
2005-06 crop year.
"U.S. export prices continue to experience upward pressure from
several factors, including healthy sales, generally high
commodity prices and the relatively weaker U.S. dollar," said
Whitehead.
Globally, the story varies. In Thailand, the largest exporter,
the country's share of global rice trade grew from 26 percent in
2006 to a projected 32 percent in 2007, but its rice stocks are
likely to fall by around 10 percent. "Even though stocks are
still at a reasonably healthy level, such a drop does not go
unnoticed by the market, and could have upward pressure on
prices," said Whitehead.
In addition, 2007 exports fell in Vietnam, the world's second
largest exporter, and in Pakistan. In Vietnam, exports were
suspended in November 2007 when the country reached its export
ceiling. New export limits and taxes for 2008 may see Vietnam's
rice exports for 2008 fall by around 20 percent. Additionally,
in Pakistan, exports are likely to fall almost 40 percent a
result of a poor harvest and rising domestic prices.
In India, fears that high prices may hinder efforts to rebuild
domestic stocks led to the imposition of export restrictions in
the form of high minimum export prices, which effectively
stopped the exports of all rice from India -- except Basmati or
high-quality non-Basmati rice. With little sign that these
restrictions will be lifted in the near future, India's rice
exports may fall approximately 10 percent.
Prices
Prices in the rice sector have continued to rise in part due to
strong global demand, the decreasing value of the U.S. dollar,
increased attention from speculative investors and the recent
global growth of biofuels.
"Indisputably, the recent global growth of biofuels has influenced the
price of rice in several ways. In the United States, competition
for rice acreage has come from grains and oilseeds, boosted in
price by biofuels or feed/food gap demand," said Whitehead.
Major price increases were seen in aromatic rice, largely a
result of limited supplies from India and Pakistan, as well as
increased demand pressures from the EU and some Asian markets.
In addition, lower-quality Indica rice prices also rose sharply,
driven by factors such as domestic price increases in China and
Pakistan, as well as import restrictions in Vietnam. While the
post rice harvest period in many countries would normally ease
upward pressure on prices, export restrictions or tariffs from a
number of major suppliers including Vietnam, India and Egypt
have made this less likely.
The involvement of funds in the rice sector continues to place
upward pressure on prices. In the wake of last year's strong
global prices in grains and oilseeds, many new players that have
become increasingly nervous about traditional equities have
gained some understanding of agricultural commodities, but feel
they may have missed the opportunity for strong returns on
grains and oilseeds. With the strong outlook for rice demand, it
is likely that new investors will continue to play a role in
maintaining upward pressure on prices.
The premier bank to the global food and agriculture industry,
Rabobank is a global financial services leader providing
institutional and retail banking and agricultural finance
solutions in key markets around the world. From its century-old
roots in the Netherlands, Rabobank has grown into one of the 25
largest banks worldwide, with over $800 billion in total assets
and operations in over 35 countries. Rabobank is the only
private bank in the world with a triple A credit rating from
both Standard & Poor's and Moody's, and is ranked among the
world's safest banks. In the Americas, Rabobank (www.RabobankAmerica.com)
is a leading financial partner to the entire American food and
agribusiness industry and is a specialist in sophisticated,
customer-driven solutions in the Global Financial Markets and
Corporate Finance arenas. Rabobank also provides retail and
commercial banking services in California; leasing; and real
estate lending, operating loans, input financing and crop
insurance to American agricultural producers, input suppliers
and agricultural manufacturers. |
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