Global Markets: Rice – Chinese Imports Decline as Exports Soar

Rice harvest. ©Debra L Ferguson Stock Photography

The convergence of China’s rice import and export quantities is shifting global rice trade dynamics. Only 10 years ago, China played a minor role in rice trade, largely self-sufficient as the top global producer and consumer. However, its domestic support for rice farmers grew with steadily climbing minimum purchase prices for paddy rice translating into high milled prices for consumers.

As global exporter prices softened in 2011, China quickly grew in prominence as a major buyer and has been the top importer since 2013. Key suppliers have been neighbors Vietnam and Burma, while Thailand and Cambodia have also played significant roles. Recent changes to the tariff definitions affecting glutinous rice and efforts to formalize trade and establish quotas with Cambodia and Burma have also shifted trade patterns.

Another recent development has been the auctions of government stocks. As the minimum purchase prices rose, so did government purchases and the volume of the temporary reserves. Rice stocks have risen to record levels, and auctions from the reserves have stepped up recently.

Over 7 million tons of stocks were sold from government reserves each of the past 2 years, with May 2019 sales alone surpassing 1.5 million tons. Though the minimum purchase price remains relatively high, these auctions augment the amount of low-priced rice available to consumers. Since 2017, exports of low-priced rice have soared. Initially, medium-grain export prices fell, making Chinese rice competitive in West Africa and the Mediterranean, while declines in longgrain export prices continue to expand the reach in Africa and beyond.

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China’s emergence in the medium-grain market was timely as both Australia and Egypt have shifted from net exporters to net importers, paving the way for China to fill the gap. In fact, Egypt has been voraciously tendering for Chinese rice. Likewise, the bulk of exports to Africa have filled the demand for oldcrop long-grain rice as Thailand’s government reserves have been depleted.

China’s suppliers are struggling to diversify to other markets, only to find themselves in competition with China abroad. The main impact has been in Asia and Africa, but the repercussions have been felt even in the United States where multiple shipments of low-priced medium-grain rice have arrived in Puerto Rico. Exports continue unabated, with April 2019 exports the highest monthly quantity since 2000. For 2020, China is forecast to export just slightly less than its 1998 record to become the fifth-largest exporter, exceeding the United States.

Bangladesh raises import tariff and lifts export ban in response to bumper crop

Bangladesh is the fourth largest global rice producer. Its imports have fluctuated significantly in recent years and reached a high of over 3 million tons in marketing year 2017/18. Imports are dependent both on the size of the crop and the trade policies. In 2017/18 with a much smaller crop, the Bangladesh government slashed the import tariff to just 2 percent, which accelerated the rate of imports. As its crops have rebounded, the government hiked the import tariff to 28 percent last year.

Because of these high tariffs, imports have fallen dramatically. For the coming year, a larger crop and new trade policy developments point toward even lower imports. This past month the duty was raised further to 55 percent, suggesting that imports will continue to drop. This is unwelcome news for India, the primary supplier of rice to Bangladesh, since the 55 percent import tariff will sharply hinder its ability to export to this market. This will cause India to seek to diversify to other export markets.

Meanwhile, the abundant supply of rice in Bangladesh has been demonstrated by the government’s willingness to remove its non-basmati export ban, which had been in place for over a decade. While only a few years ago the Bangladesh government was eager to import inexpensive rice, the government now has remarkable aspirations to export over a million tons of rice. This stands in stark contrast to its 5,000 tons exported annually the past few years. In addition, there is intense competition among rice exporters in the region, limiting Bangladesh’s export potential.

Continued Decline for U.S. Rice Market Share in Mexico

Historically, U.S. rice exports have consistently performed strongly in the Western Hemisphere, even as its global market share has gradually declined. Over the last 2 decades, U.S. exports have seen a steady decline in global market share – from a high of 14 percent in 2003 to a low of 6 percent in 2018.

In addition to lower sales and vanishing markets in Asia and the Middle East, one notable loss in market share for U.S. rice is with its top buyer, Mexico. For over a decade, Mexico imports of U.S. rice fell from 100 percent to 71 percent in 2018 and if the trend continues would decline further.

Although Mexico is primarily supplied by the United States, other major producers in the region, such as Uruguay, Guyana, Argentina, and now Paraguay, have made inroads. The Mexico tariff-rate quota and higher U.S. prices due to ongoing weather issues could also negatively impact Mexico’s purchases of U.S. rice. With the United States experiencing large carryin stocks but a lower production forecast, the competition for market share in Mexico will likely remain intense in the coming year.

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