Global Markets: Rice – China’s Medium Grain Exports Hit New Record

    China has returned as a significant exporter of milled rice, and its presence in the medium grain market is disrupting exporter trends. Medium grain trade constitutes a small portion of total global rice trade and has been dominated in recent years by U.S. and Australian exports.

    China’s exports of this class of rice had been muted and on a long-term downward trend, reflecting relatively high domestic prices. However, this changed in 2017 as exports began to rise. In 2018, China’s exports were up eightfold from only a couple years before, surpassing the quantity exported in 2003 and hitting a new record.

    China’s medium grain milled rice exports are destined for a wide range of markets. It has expanded from nearby markets in East Asia to the Mediterranean region, including Turkey. Notably, China has been the most successful at supplying Egypt amid its current shortfall. A large quantity is also being shipped to Africa, with Cote d’Ivoire as the biggest buyer.

    China’s presence is extending even into the Western Hemisphere with a few shipments to Puerto Rico. This has contributed to U.S. medium and short grain imports growing to the highest level in 11 years.

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    At nearly half the price of Australian and U.S. medium grain, China’s rice is an alluring option for price-sensitive markets. Rice from the 2013 crop is being auctioned from massive government stockpiles, so it is likely that some of the exported rice is several years old.

    These low-priced exports from China present a serious challenge that will likely continue to undercut U.S. and Australian medium grain exports for the remainder of 2019.

    Indonesian Rice Imports Down Sharply

    Indonesian rice imports in 2019 are expected to decline nearly 80 percent compared to last year. Its reduced presence as a major importer is one reason for lower global trade in 2019, and this impact is expected to be felt by key suppliers Thailand and Vietnam.

    As the fourth-largest global producer, imports constitute a minor portion of its overall supplies but can make a significant difference on the global market. Indonesia’s imports are typically driven by both production shortfalls and government policy.

    Last year, the country scrambled to purchase from abroad to offset tight stocks and high domestic prices. The 2019 crop is forecast slightly above last year’s, with no major causes for concern.

    Despite a large and growing population, total consumption is expected to be steady in 2019 as Indonesians continue to shift to wheat-based products and diversify their diets as incomes grow. In addition, recent changes in government policy have shifted toward food assistance that enables recipients to select from a wider range of food options.

    Because of sharply lower allocations for direct distribution, the Indonesian Logistics Bureau (BULOG) has reduced its own necessity for large stocks. Therefore, Indonesian stocks – which rose in 2018 on massive imports – are expected to decline in 2019, offsetting much of the need for imports.

    Stocks, while lower year-to-year, are at sufficient levels to discourage greater imports.

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