Global Markets: Rice – Brazil Seeks Imports from Non-Traditional Suppliers

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Earlier this year, Brazil harvested a large crop which supplied a temporary domestic surge in purchases after COVID-19 response measures were put in place. Strong demand for Brazilian rice has also come from exports. Since the beginning of 2020, the Brazilian real has lost 30 percent of its value, allowing Brazil to export a significant amount, especially to the Western Hemisphere and West African markets.

In fact, it has exported 1.1 million metric tons in the first 8 months of 2020, up 80 percent compared to the same period last year. With increased internal and external demand, Brazilian supplies have tightened, resulting in sharply lower stocks and rising prices.

Consequently, Brazil’s 2020 imports are forecast at 850,000 tons, the highest since 2003. Over the past 5 years, Brazil has imported essentially all of its paddy and milled rice duty-free from MERCOSUR countries Argentina, Paraguay, and Uruguay. However, tight stocks and rising export prices in Paraguay and Uruguay have caused Brazil to now seek imports from non-traditional sources.

In September, Brazil implemented a duty-free tariff rate quota for up to 400,000 tons outside of MERCOSUR, eliminating the 10 percent tariff on paddy rice and 12 percent tariff on white rice through the end of December.

Some of these non-traditional suppliers may include the United States and South Asian countries. Last month, the United States sold 108,250 tons of paddy rice to Brazil, the highest since 2010, when Brazil last had large non-MERCOSUR imports due to tight supplies. When Brazil’s stocks were tight in the past, the United States shipped paddy rice allowing mills in Brazil to add value through processing.

While the United States does have an advantage in exporting paddy rice, it has a disadvantage in shipping milled rice due to challenges in labeling and packaging requirements for the short term. In contrast, milled rice exports from Asia would not only meet the requirements to be packaged in kilogram-based bags, but also are far more competitively priced, ranging from $100/ton to $200/ton less than Western Hemisphere suppliers.

With U.S. paddy rice poised to meet immediate needs for Brazilian millers and Asian milled rice able to meet consumer needs at competitive prices, these non-traditional sources are well positioned for export opportunities to Brazil.

Looking ahead to 2021, Brazil’s imports are forecast slightly lower, but still relatively high. This demand will most likely be met by traditional MERCOSUR countries, given the expiration of the duty-free tariff rate quota and the expected decline in South American prices following new-crop supplies.

India Rice Exports Rise, Despite COVID-19-Related Disruptions

India continues to be the world’s largest rice exporter, accounting for nearly 30 percent of rice trade. Exports are forecast at 12.2 million tons for 2020, up 25 percent from the previous year. Given its ample stocks, no export restrictions were put in place this year, in contrast to other exporters that did so in response to COVID-related concerns.

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Instead, the main disruptions in India occurred during April when a lockdown was implemented, affecting port operations. Since then, exports have risen each month, setting a record in July. Exports will likely remain strong, given lower prices in comparison to other major exporters

Exports have surged despite strong domestic demand. In addition to existing consumer subsidy programs, the Government of India supplied more than 14 million tons of rice under various relief programs in response to the pandemic. Rice has accounted for most of the food grains provided under relief programs. As a result, consumption has grown 7 percent.

With large exports and strong domestic use, ending stocks for 2019/20 are only slightly larger than the prior year, as reflected in changes made this month for exports and consumption. Although global stocks are dominated by China, India holds a significant share at 17 percent, steadily growing over the past decade on back-to-back record harvests and government procurement.

Looking into the next year, production is forecast at a record high for the fifth consecutive year. The autumn kharif crop is now being harvested, with good yields expected due to excellent monsoon rains across the rice-growing states. The government of India is expected to procure even larger amounts of rice and domestic consumption will remain high. Despite strong domestic demand, exports are still expected to shoot up to a record high 12.5 million tons for the marketing year as ample supplies keep Indian rice competitive.

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