RICE YEARBOOK--SUMMARY November 21, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of the RICE YEARBOOK is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- Rice Prices To Weaken in 1996 Average world and U.S. rice prices, supported through the summer and fall by large Asian demand and tight international supplies, are projected lower in the first half of 1996, due principally to a major contraction of world import demand. Through the first 3 months of the August/July marketing year, U.S. farm prices averaged an estimated $8.00 per cwt. However, the weakening of prices in 1996 is likely to hold the season average farm price between $7.00 and $8.00 per cwt for 1995/96, up from an estimated $6.74 in 1994/95. The U.S. rice industry still relies on exports for about 44 percent of total disappearance, making the domestic situation highly dependent on international market factors. After a year of record world import demand, world trade is projected sharply lower in 1996 at 16.2 million tons as Bangladesh, China, Indonesia, and Iran significantly reduce import volume. Although global production is projected lower and stocks are projected to tighten further in 1995/96, the outlook for good harvests in key Asian countries is expected to significantly reduce global demand and increase exportable supplies. Record or near-record harvests projected for Burma, India, Pakistan, the Philippines, and Vietnam are expected to increase global exportable supplies in 1996, despite slightly lower crops in the United States and Thailand. As a result, internationally traded rice prices are projected to weaken substantially in 1996. U.S. export prices are also projected lower, but are not expected to fall as fast as international prices due to reduced U.S. supplies. Thus, the U.S. price premium over export competitor prices is expected to widen in 1996, potentially hurting U.S. competitiveness in international markets. Domestic factors fueling the higher U.S. price premium in 1995/96 include the outlook for sharply lower production and a significant reduction in stocks. Production Forecast Lower for 1995/96 Based on conditions in early November, USDA forecasts the 1995 U.S. rice crop at 174.2 million cwt, down 24 percent from 1994's record 197.8 million. Reduced area and yields are behind the decline. U.S. rice plantings are currently estimated at 3.120 million acres, down 7 percent from 1994. A 5-percent acreage reduction program and lower farm prices in 1994/95 are responsible for the reduced plantings. Harvested area is also forecast down 7 percent in 1995 at 3.092 million acres. National average yields are forecast at 5,635 pounds per acre, 5.5 percent below last year's record. U.S. rice production prospects diminished significantly during August due to prolonged, high temperatures covering most of the Gulf coast and Delta growing regions. The high temperatures created less than optimal conditions for head filling and led to reductions in yields across the affected regions. California also experienced less than ideal conditions as an exceptionally cool, wet spring delayed plantings and led to a slow start. Forecast Record Use and Continued Strong Exports Imply Lower Ending Stocks in 1995/96 A projected twelfth consecutive year of record domestic food use and continued strong exports drawn from lower total supplies are expected to reduce 1995/96 ending stocks 24 percent from a year earlier to a tight 23.7 million cwt (rough). During calendar year 1996 U.S. rice exports are forecast at 2.9 million tons, down only slightly from 1995's 3.0 million. However, the large projected decline in world trade in 1966 implies a growing market share for U.S. rice at 17.9 percent, up from a projected 15.3 percent in 1995. On a marketing year basis, 1995/96 U.S. rice exports are projected down sharply from last year's record 100.9 million cwt (rough). However, at 86 million cwt, they would still be the third largest on record. The outlook for reduced 1995/96 U.S. rice supplies, already tight long-grain stocks, limited use of government export programs, and a rising premium relative to Thai prices are behind the decline in U.S. exports. Latin America, the Middle East, and Europe are expected to remain important markets for U.S. rice. Rough rice exports to these markets are expected to decline to 8 million cwt, compared with 18.5 million last year as limited U.S. supplies place a premium on domestic milling. Continued strong U.S. exports in 1995/96 and a larger market share in 1996 will depend in large part on how much the U.S. price premium rises above foreign competitors' prices--particularly export prices in Thailand, our top competitor--and the subsequent reaction by price-sensitive U.S. markets. Printed copies of the Rice Situation and Outlook Yearbook will be available in about 2 weeks. For more information, contact Randall Schnepf (202) 501-8513. Text of the report also will be available electronically. For details on electronic access, call (202) 219-0515. END-END-END