Rice Market: Keeping an Eye on China

Flags of China and the United States of America. Photo: sldesign1

China, the world’s largest producer and consumer of rice, is focused on increasing its already large share of rice cultivation and exports.  In 2016/17, China’s milled rice exports nearly tripled from the previous year driven by large shipments to many African countries on commercial terms as well as for donations. 

Ending stocks are forecast to increase to 6.1 million tons to 75.53 million tons (milled rice basis) more than 52 percent of annual usage and about 13 times the size of the projected 2017 U.S. rice harvest.

China also is expanding rice production beyond its borders.  China has invested in a hybrid rice research center in Pakistan to enhance Pakistani rice production and exports to China via the China-Pakistan Economic Corridor.

The State Council’s think tank, the China Center for International Economic Exchange, has recommended investments in Thailand, Vietnam, Cambodia, and additional investments in Pakistan to improve rice production and trade under the One Belt One Road initiative, China’s global trading strategy. This increase in production could become a direct competition for U.S. long grain exports to China.

While the U.S. rice industry awaits access to this important market, there are additional issues that present challenges in China.  The state guaranteed minimum purchase prices for paddy rice from farmers is set at above world market prices, as shown in the table below.  With an ongoing strengthening of the RMB against the U.S. dollar, those prices, in dollar terms, continue to rise.

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The U.S. Trade Representative (USTR) is challenging China’s high levels of support for producers of rice, wheat, and corn in the World Trade Organization (WTO), and legal arguments before a WTO dispute settlement are expected early next year.  Additionally, USTR is also challenging the way that China administers tariff rate quotas for grain imports.

Although China has signed a protocol to allow imports of U.S. rice, they first have to inspect U.S. export facilities before rice exports are a reality.  In the meantime, USA Rice strongly believes there is a market for U.S. rice in China and thus is exhibiting at the Global Food & Hospitality Expo (HOFEX) in Shanghai this November to showcase the various types and forms of U.S. rice.

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