Author 丨Shu Xiaoting
Editor 丨he Jia
On June 28, local time, the Food and Agriculture Organization of the United Nations released a message saying that the geopolitical situation affects areas that are crucial to world food security, increasing uncertainty and exacerbating the risk of fragmentation of the global agricultural food market.
Since February 24, due to factors such as supply concerns caused by the Conflict between Russia and Ukraine, international wheat, corn and other cereal prices have been in a high-level volatile situation. So far this year, the CTO corn and wheat futures prices have risen by 19.98% and 22.4% respectively, and in the past year, they have risen by 34.91% and 41.04% respectively.
Among the world's major cereals, international rice prices fluctuate relatively little. International rice prices have rebounded in recent months, with the FAO Rice Price Index rising for the fifth consecutive month in May. On June 28, local time, the September brown rice contract traded on the Chicago Board of Trade (CBOT) was quoted at $16.58 / US quintal; So far this year, CBOT brown rice futures prices have risen by 16.69%.
Li Jianping, chief rice analyst of the Agricultural Products Market Analysis and Early Warning Team of the Ministry of Agriculture and Rural Affairs, said in an interview with the 21st Century Business Herald that the rebound of international rice prices from last year's continuous decline was mainly affected by production costs, alternative consumption, procurement demand and other factors.
Rice prices are less affected by the food market
Recently, international rice prices have rebounded, boosted by factors such as price transmission of related varieties. According to the latest data released by the Food and Agriculture Organization of the United Nations, the FAO Rice Price Index reached a 12-month high of 109.2 points in May, up 3.5% month-on-month and 1.2% lower than the same period last year.
Li Jianping told reporters that the factors affecting the price of rice are mainly in the following aspects: First, the Conflict between Russia and Ukraine has led to an increase in global energy, fertilizers and other prices, increasing the cost of rice production, and indirectly pushing the price of rice; Second, the spread between international wheat prices and rice prices has widened, and the consumption of alternative feed rice has increased, boosting rice prices; Third, the uncertainty facing global food trade has triggered food security concerns in various countries, and the strong demand for Thai rice from Middle Eastern countries such as Iran has pushed the price of rice.
In June, international rice prices also fell due to the decline in international wheat prices. In this regard, Li Jianping pointed out that under the support of rising costs and procurement demand, coupled with the impact of the Fed's interest rate hikes, the subsequent international rice prices are expected to remain high, and the momentum of a sharp rise is insufficient, but it is also difficult to fall deeply.
Hu Bingjing, director of the Agricultural Product Trade and Policy Research Office of the Rural Development Research Institute of the Chinese Academy of Social Sciences, told reporters that among the three major cereals of wheat, corn and rice, the price of rice as a whole remains relatively stable, and its market operation law is different from that of wheat and corn. This is mainly based on the following factors: First, from the perspective of growth period, rice belongs to short-day crops, and the shortest growth period is 90 days; Secondly, the rice trade volume accounts for a relatively small proportion, accounting for only about 10% of global production, and the rice trade between countries is mainly to meet the demand for adjustment; In addition, the highly subsistence countries that feed on rice as a staple food are concentrated in East, Southeast asia and South Asia, where geo-climatic conditions determine abundant rainfall, good irrigation conditions and rapid rice regeneration. Under the influence of multiple factors, the price of rice is relatively less affected by the grain market.
Li Jianping also analyzed to reporters that compared with other grain varieties, the proportion of international rice trade is low. In 2021, the global trade in rice will be about 47.6 million tons, accounting for 9.28% of consumption, while the trade of wheat, corn and soybeans will account for 24.74%, 16.03% and 44.65% of consumption, respectively. Therefore, from the perspective of its position in the international food trade, the price of rice is relatively less affected by the food market.
The outlook for rice trade remains positive
About 120 countries in the world produce rice. According to data released by the U.S. Department of Agriculture on April 1, the top ten rice producers in the world are China, India, Indonesia, Bangladesh, Vietnam, Thailand, Myanmar, the Philippines, Brazil, and Japan, and the top ten consumer countries are China, India, Indonesia, Bangladesh, Vietnam, the Philippines, Thailand, Myanmar, Japan, and Brazil.
What is the impact of changes in international rice prices on the relevant importing countries?
Li Jianping said that although China is the world's largest importer of rice, considering the factors of rice production first in the world, the second largest rice sown area, and the small proportion of rice imports, China is not greatly affected by the international rice market. Specifically, China's rice imports in 2021 reached 4.96 million tons, accounting for only 3.33% of production. Moreover, China's rice imports come from a scattered source, mainly from India, Vietnam, Pakistan, Myanmar and Thailand. For countries such as the Philippines that import large rice, have high import dependence, and relatively concentrated import sources, it is easier to feel the pressure brought about by the rise in international rice prices.
In late May, Thai Prime Minister Prayut Chan-o-cha suggested that Thailand and Vietnam should work together to raise rice prices to boost the bargaining power of both countries in the global rice market. However, there is no follow-up policy implementation.
In this regard, Li Jianping said that Raising the export price of rice in Thailand will do more harm than good for the country, and the probability of taking this measure is not high. Thailand's domestic rice prices are already higher than rice export prices, and international rice prices in June showed a downward trend compared with May, if Thailand and Vietnam jointly raise rice export prices, it will weaken the competitiveness of their rice exports.
Hu also pointed out that Thailand is actually unlikely to raise the price of rice exports. He analyzed that on the one hand, Thailand is dominated by a smallholder economy, and due to the fast production speed of rice and the challenges caused by the rainy season to rice storage, in order to boost rice exports, it is not a wise move to raise prices. On the other hand, unlike wheat, corn, soybeans and other trades, which have the characteristics of monopoly, high degree of centralization, and a relatively large proportion of trade, in the field of rice, the competition between Pakistan, Thailand, Vietnam, Myanmar and India is becoming increasingly fierce, and it is more difficult for Thailand to try to achieve economic goals through political means.
Among the major rice producers and exporters, India's every move is also under the market's attention. Earlier, India took steps to restrict wheat and sugar exports. Will rice be the next agricultural product involved in India's export ban?
Li Jianping pointed out that the key to whether India will restrict rice exports lies in whether its domestic rice supply is sufficient.
Earlier, on June 13, Pan Di, a senior official at India's Ministry of Consumer Affairs, Food and Public Distribution, pointed out that as the world's largest rice exporter, India has sufficient rice stocks and has no plans to restrict exports for the time being.
According to the Food Corporation of India (FCI), India's current rice stocks reach 33 million tonnes, higher than in the same period in recent years. In addition to inventories, India's rice exports account for about 40% of global exports, with a record 21.5 million tonnes of rice exported in 2021. "Considering that India's rice exports are an important source of foreign exchange earnings, and rice exports have maintained growth in the past two years, it is expected that the possibility of subsequent restrictions on rice exports is not very likely." Li Jianping said.
From June to September, India ushers in the monsoon season. Kelly Goughary, a senior research analyst at Gro Intelligence, a U.S. agricultural consulting group, said it would also help boost rice production in India. Affected by la Niña weather, India's rice production reached a record 129.7 million tonnes last year, she said.
Sonal Varma, chief economist at Japan's Nomura Securities, said that global rice stocks are abundant and India's harvest is expected to be good this summer, and the supply risk to rice is relatively low at present.
What are the prospects for rice trade in the future? The USDA reported on June 14 that global rice production is expected to reach a record 515.35 million tonnes in 2022/23, an increase of 700,000 tonnes from the previous forecast and 1.7 million tonnes from the same period last year; and the projected global ending stocks are expected to be 183.4 million tonnes, down 2.8 million tonnes from the previous forecast, 2% lower than the same period last year, with India accounting for the bulk of the downward revisions and year-on-year declines; Global rice trade is expected to reach a record 54.3 million tonnes (finished rice) in 2023, up nearly 3% from the same period last year. Among the major exporters, China, India, Thailand and Pakistan are expected to increase shipments in 2023. India's exports are expected to increase by 1 million tonnes to a record 22 million tonnes, accounting for nearly 41 percent of global exports and more than Thailand, Vietnam and Pakistan combined.
However, the Food and Agriculture Organization of the United Nations (FAO) latest Cereal Supply and Demand Brief ("Brief"), released on 3 June, said that while the outlook for international rice trade remains positive, world cereal trade is expected to fall by 2.6% from 2021/22 to 463 million tonnes, the lowest level in three years. Meanwhile, the Brief's preliminary forecasts for global cereal production in 2022 suggest that its yield could fall to 2.784 billion tonnes for the first time in four years, a decrease of 16 million tonnes from record production in 2021, with the largest decline in maize production expected, followed by wheat and rice, while barley and sorghum yields are likely to increase.
This issue is edited by Jiang Peipei Intern Zhan Huinan