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Global Markets: Rice – Record Trade with Diversifying Suppliers

Ernst Undesser
By Ernst Undesser November 9, 2017

In 2017, rice trade is set to hit a new record, with only a slight decline forecast for next year. Import demand is primarily supported by expanding consumption in Africa and the Middle East with growing populations and changing diets.

China remains the largest importer, primarily supplied by neighboring regions. Weather-induced production shortages in Bangladesh and Sri Lanka sparked sudden import demand this year, sending rice trade to a record.

The top exporter is India, as it has been since 2012 after it removed its non-basmati export ban. Meanwhile, Thai exports are forecast to hit a record in 2017, spurred by sales from government-held stocks which have now been nearly depleted. Vietnam has seen an uptick in sales, not only to China, its largest buyer, but also to regional markets and Africa.

These top three exporters account for nearly two-thirds of global exports, and together with the next largest exporters, Pakistan and the United States, account for nearly 80 percent of trade.

But this year has seen the further rise of emerging and returning suppliers. Burma is set to ship volumes not witnessed since before WWII, as they fulfill demand in neighboring China, supply Europe under the Everything but Arms Agreement, and make inroads into African markets.

Cambodia has steadily increased exports and recently secured a tender to Bangladesh, demonstrating its expanding reach. Meanwhile, China as the top importer is also interestingly becoming a sizable exporter, reaching primarily African markets this year with low-priced rice.

China has not shipped this quantity to Africa since the early 2000s. An expansion of global rice trade has brought about more opportunities for the largest exporters, but the growth of these secondary players is changing the competitive landscape.

U.S. Rice Market Share Declines in Mexico while South America Expands

Mexico is the largest rice importer in the Western Hemisphere and the top market for U.S. rice. While the United States is the main supplier of both paddy and milled rice to Mexico, most U.S. exports are paddy rice. Historically, the United States had captured increasing market share throughout the 1990s as tariffs were eliminated through NAFTA.

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Over the past few years, this trend has been shifting in both paddy and milled rice sales. For milled rice, the United States has been the leading supplier, but beginning in 2011 other competitors began shipping significant amounts.

While Asian suppliers briefly supplied the market, more recently it has been South American competitors that have gained ground. Uruguay had 8 percent market share in 2016 and has increased market share to 15 percent year to date (see chart). Uruguay has the similar advantage as the United States of a zero duty on milled rice.

On the paddy side, the United States had maintained an almost 100 percent market share with little competition. However, a new paddy competitor has emerged, with Guyana beginning to ship to Mexico in July 2017. Guyana normally sells under a 9 percent tariff rate but can enter the market duty free through December 2017 under a 150,000 MT TRQ.

Mexico implemented this quota available to all origins in March 2017 in an effort to diversify supplies, causing further concern for U.S. suppliers.

Full report.

Ernst Undesser
By Ernst Undesser November 9, 2017