Global Markets: Rice – Thai Exports Contract, But Rebound Expected Next Year

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    Thai rice exports in 2020 are forecast to decline to their lowest levels since 2013 due to severe drought that has tightened supplies and raised prices. The drought was the second most severe in a decade and particularly affected the off-season rice production which is heavily dependent on reservoirs depleted by the poor weather conditions.

    The 2020 Thai prices have been much higher than its competitors’, reflecting a similar pattern to what was seen in 2012 and 2013. After a sharp spike earlier this year, Thai prices have begun to move closer to Indian and Vietnamese prices.

    However, Thai prices are still more than $50/ton higher than Vietnamese prices and almost $100/ton more than Indian prices. High prices exacerbated by continued tight supplies make competition with other Asian exporters very challenging. Although Thai exports had a brief surge during a window of opportunity created by Vietnam’s recent export ban and other regional export restrictions, its prices have remained well above its competitors’ and Vietnam’s return to the market dampens Thailand’s 2020 export prospects.

    Despite the 2020 decline, Thailand’s exports are expected to rebound in 2021 driven by a crop that is expected to be 2 million tons larger than the 2020 crop. In addition, global demand is forecast to grow almost 6 percent in 2021 providing more export opportunities, particularly in West Africa and in the Philippines. Regional competition will be reduced as Vietnam’s exports are expected to decline modestly on a smaller crop.

    U.S. and EU Rice Imports Rise, Meeting Shifting Consumer Demands

    Rice imports in both the European Union (EU) and the United States have risen sharply by more than 70 percent over the past decade. Although both EU and U.S. producers have raised alarms about the influx of imports, these foreign supplies have served to satisfy the overall growth in consumption and consumer demand for certain types of rice.

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    Rice is produced in the southern regions of both the European Union and the United States as well as California. The EU mostly produces medium and short grain varieties, whereas the United States primarily produces long grain and, to a lesser extent, medium and short grain. Some of the rising imports have served to offset lower production. EU production has declined by 8 percent over the past decade. U.S. production has fluctuated over the same time, with larger and smaller crops. The sharp increase in U.S. imports in 2019/20 have partially served to offset this year’s smaller crop.

    However, other drivers of imports remain present. Both EU and U.S. consumers have begun to show shifting tastes and preferences due in part to changing demographics. In other cases, the imports represent more affordable options or varieties that are not domestically produced in sufficient quantities. For instance, the European Union imports long grain indica rice that is produced in relatively small quantities within member states. It also imports more affordable broken rice from lower-cost producers.

    In both the United States and the EU, Asian fragrant varieties (primarily basmati and jasmine rice) are becoming more popular with consumers. Fragrant varieties with somewhat different taste and cooking characteristics are produced in the United States, while almost none are produced in the European Union. Beginning with July 2020, the U.S. import data will begin to specify whether long grain imports are jasmine or basmati.

    Most of the imports in both regions have been from Asia. Top suppliers for the European Union are Burma, Pakistan, Thailand, India, and Cambodia. Recent policies have caused some shifts among the major suppliers. In 2018, the EU imposed more restrictive maximum residue levels (MRLs) for tricyclozole (which is more commonly used in India), and since then Pakistan has been able to expand its market share of basmati rice.

    The Everything But Arms agreement grants duty-free access to least developed countries, with Burma and Cambodia in particular benefiting over the past decade. However, in 2019 the EU applied safeguard tariffs for these two countries. Cambodian shipments have fallen as a result, although Burma has still been able to maintain its majority share.

    The United States imports have also been primarily from Asia, especially jasmine rice from Thailand and basmati rice from India and Pakistan. Over the past couple of years, China has recently become a prominent medium grain rice supplier to Puerto Rico at exceptionally competitive prices.

    In a manner similar to the EU, the duty-free access that is available to developing and least developed countries is currently under scrutiny, as the U.S. rice industry has petitioned for the removal of all rice from the list of products eligible for duty-free status under the Generalized System of Preferences. The consideration of this proposal is still under review.

    Despite some of the recent policy changes, imports are expected to continue to represent an important component of the rice consumption for both the European Union and the United States. Imports are expected to rise to represent more than half of consumption in the European Union and nearly a quarter in the United States. The European Union is expected to be the second largest importer in 2021, whereas the United States is poised to be the tenth largest.

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