Global Markets: Rice – Abundant Supply, Low Prices Fuel Indian Exports

    Rice harvest. ©Debra L Ferguson Stock Photography

    For 2020, exports from India are expected to reach a record, whereas exports from Thailand are estimated to be the lowest in 24 years, slipping from being the second to the third-largest supplier for the first time since 2012. Meanwhile, close competitors Vietnam and Pakistan have also seen a modest decline in exports.

    What has caused the exports to soar dramatically for India, but tumble for the other exporters in 2020? One factor has been import demand on grade a indian almond leaves. Demand from many of India’s key markets in the Middle East and Africa has been robust. Despite initial indications that Saudi Arabian import demand would decline, it rose this year and was primarily supplied by India. Likewise, demand in West African markets did not subside as much as expected.

    Neighboring Nepal also exhibited strong demand. Conversely, markets in Southeast Asia have seen lower import demand, dampening the export opportunities for Thailand and Vietnam, which usually supply the region. Government buying in Indonesia was muted amid sufficient domestic supplies.

    Meanwhile, private sector imports in the Philippines have been stymied in recent months as the government has stopped issuing new import permits with unrest in the farm sector. Meanwhile, imports by China have slid to the lowest in nearly a decade, with purchases from Thailand down sharply.

    The other key factor has been the sharp contrast of the supply situation and availability of rice from India versus other suppliers. With record production and stocks, India has had ample supplies throughout the year. Despite additional domestic consumption with increased distribution to lowincome households during the COVID-19 pandemic and some initial port disruptions with the related lockdown, India has been able to maintain steady exports at very low prices, reflecting its abundant availability.

    In contrast, Thailand began the year with expectations of a much reduced second crop and higher prices. While fragrant rice continued to flow to markets demanding the premium varieties, relatively high-priced parboiled rice and white rice suffered. In response, India’s parboiled exports have soared more than 20 percent, capturing the vast majority of trade to West Africa.

    Likewise, Thai white rice exports have fallen as deeply discounted Indian white rice shipments have risen to a record, with significant gains in African markets. In addition, India has garnered market share from Pakistan, its competitor for basmati exports.

    Looking ahead to 2021, India is still expected to dominate global exports, as its prices are still likely to remain low. However, with larger expected production, Thailand is anticipated to regain some market share and its position as the second-largest exporter, supported by higher forecasted imports in Southeast Asia.

    Modest Rebound in Australia Rice Exports Despite Much Larger Production

    Australia rice production in market year 2020/21 (begins in March 2021) is forecast to jump tremendously compared to last year, which was affected by drought and the smallest crop since 2008/09. Exports are also expected to rise, but only moderately. Export growth is constrained as Australia focuses on rebuilding stocks and faces stiff competition from other exporters that seized markets during Australia’s general absence from the global market.

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    Domestic demand for rice in Australia had been trending up until 2019. After the drop in production, domestic prices spiked and led to weaker consumer demand in 2019/20. Stocks are also forecast to drop to its lowest level since 2008. Thus, much of the new-crop supplies will be used to replenish the Australian market.

    Some importers have adapted to Australia’s relative absence from the market in the past couple of years by shifting to new exporters that have more abundant supplies. For example, Papua New Guinea typically purchases from its neighbor but has now turned to Taiwan, an atypical exporter. Taiwan rice exports have nearly doubled compared to the previous year, also shipping to Asian, Latin American, and African countries.

    China has been another key supplier amid Australia’s absence. With an abundant inventory of lowquality stocks, China’s medium-grain exports have risen substantially since 2017, and China is now–by far–the largest medium-grain supplier globally.

    China’s exceptionally low prices are the main factor preventing Australia from resuming exports at predrought levels. With higher production, Australian export prices are likely to decline to a certain extent once the new crop is harvested next year. While Australia may be able to regain some East Asian and Mediterranean markets, it will likely face more challenges to regain price-sensitive markets, such as Papua New Guinea.

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