India has been the leading rice exporter since 2012. It continued to maintain its overall position as top exporter in 2019, but its volume fell in line with overall reduced global trade. Although the forecast is lowered this month, exports are expected to rebound in 2020 on its relatively abundant supply situation and reduced competition.
In 2019, India exports fell to 9.8 million tons, the lowest in 8 years. Non-parboiled, non-basmati white rice exports fell sharply, with less buying from Bangladesh and Indonesia. Similarly, Indian parboiled trade was negatively affected by Bangladesh’s absence from the market. Broken rice exports plummeted to West African buyers, especially Senegal. Paddy rice sales to neighboring Nepal have remained steady. Among the various rice categories, basmati was the only category with significant gains, buoyed particularly by large shipments to Iran.
In 2020, there are several factors pointing to promising exports for India, enabling it to maintain its dominant position. The 2019/20 Indian rice crop is now estimated at a record 118.0 million tons. In addition to this new crop, the stocks situation is abundant, with the government food security reserves swelling to record levels.
Although the stocks in India are not at the extraordinary quantities seen in China, both countries are expected to show export gains in 2020, supported by overall abundant supplies and current low prices. In addition, reduced export competition from Thailand due to ongoing drought will expand India’s export prospects, especially for parboiled and white rice.
Likewise, Pakistan has tighter beginning stocks which more than offset a larger crop, offering improved prospects for India’s basmati trade.
There are several wild cards that have the potential to impact the export forecast. Domestic use for rice remains strong and government procurement for stockholding has been robust so far. Burma is providing additional export competition for white rice as it continues to expand its sales beyond China and Europe, with a focus on Africa. Whereas Indian export prices are low relative to the other major Asian suppliers, such as Thailand, the overall increase in global rice prices has the potential to dampen global imports.
The strength of the rupee is another factor to consider. Overall performance of parboiled trade depends largely on import demand from Nigeria and neighboring countries, currently constrained by a border closure in Nigeria.
Western Hemisphere Paddy Rice Trade Overview
Most of global rice trade is milled rice, while paddy (rough) rice represents only about 5 percent of global rice exports. However, paddy accounts for approximately one-third of rice trade in the Western Hemisphere. Countries surrounding the Caribbean basin are the primary paddy buyers, with the United States and Southern Hemisphere exporters competing for market share.
The major Western Hemisphere paddy importers are Mexico, Venezuela, Colombia, and Central American countries. These countries produce rice, have their own milling industries (that they seek to protect) and prefer to capture the value-added by milling in-country. Mexico is the top global importer of paddy rice. Over the years, consumption has grown and been supplied by larger imports, especially of paddy rice.
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Duty free access granted under the North American Free Trade Agreement and maintained with the United States-Mexico-Canada Agreement has provided a competitive advantage for U.S. rice. In addition, geographic proximity and favorable logistics facilitate a majority market share. However, U.S. market share waned in 2017 when Mexico established an annual tariff-rate quota (TRQ), of up to 150,000 tons, allowing duty-free imports from other suppliers including Guyana and Uruguay.
Although the TRQ was extended through 2019, the United States regained market share from Guyana last year with more competitive prices. Meanwhile, Uruguay’s access to the Mexican market is currently constrained by phytosanitary issues.
Although Central American countries produce rice, consumption growth is leading to rising imports. The Dominican Republic-Central America Free Trade Agreement (FTA) has provided opportunities to U.S. exporters. Over the phase-in period, TRQ volumes for paddy rice are expanding while tariffs decline.
Colombia is another market where an FTA has opened new opportunities to U.S. rice. The TRQ volume is rising each year and is consistently filled. In 2017, Colombia granted access for the United States to ship paddy to all ports. This expanded port access has resulted in Colombia shifting from primarily importing milled rice to mainly paddy rice.
Venezuela has been a significant paddy importer, but unlike the other regional importers, its volumes have fluctuated significantly in recent years due to its political and economic turmoil. Notably, imports fell sharply in 2019, with further reductions likely in 2020. Amid the economic constraints, Venezuela has shifted its suppliers over time to access the lowest-price option.
The Western Hemisphere rice market has evolved to include several suppliers willing to export paddy to these markets. The United States is the top supplier, accounting for over half of global paddy exports. FTAs and logistical advantages have enabled a majority market share throughout Mexico, Central America, and Colombia. However, its dominance was threatened by South America in 2018 particularly as Brazil’s exports to Venezuela increased sharply.
Other South American exporters include Guyana, Paraguay, and Uruguay. In 2019, overall South American exports declined, although record Uruguayan shipments partially offset some of the Brazilian and Paraguayan decline. The United States regained market share in 2019, a trend that is expected to continue into 2020 due to the tight supplies of Western Hemisphere competitors.
Thus far, U.S. export sales have remained strong across the region. While U.S. supplies are expected to tighten over the summer months, prospects are favorable for increased U.S. supplies after the harvest of the 2020 crop.