Rice YEARBOOK – SUMMARY November 28, 2005 November 2005, ERS RCS-2005 Approved by the World Agricultural Outlook Board ---------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete report will be available electronically about 1 week following the summary release. --------------------------------------------------------------- U.S. 2005/06 Rice Crop Is Projected At a Near-Record 220.7 Million Cwt The 2005/06 (August-July) U.S. rough rice crop is forecast at 220.7 million hundredweight (cwt), down more than 4 percent from a year earlier but second only to the 2004/05 record. This year’s smaller crop is the result of an almost 5-percent reduction in the average yield more than offsetting a slight increase in area. Weather problems in both California and the South--including two Gulf Coast hurricanes--account for most of the decline in the average yield. The increase in total acreage was the result of expanded acreage in the South more than offsetting a decline in California. Medium grain accounts for all of the decline in U.S. rice production. In contrast, both long and short grain crops are projected larger in 2005/06. In early November, the U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS) forecasted average field yields for 2005/06 at 6,603 pounds per acre, down 339 pounds from the year-earlier record. Field yields are projected lower this year for all reporting States except Louisiana and Texas, with California experiencing the largest decline. A 27-percent decline in California’s rice production-- plus a slightly smaller Texas crop--are projected to more than offset record crops in Arkansas and Missouri and larger crops in Louisiana and Mississippi. Total U.S. rice supplies in 2005/06 are projected at a record 273.4 million cwt (rough basis), up 2 percent from a year earlier. A big increase in beginning stocks and larger imports are projected to more than offset a smaller crop. This is the second consecutive year of record total U.S. rice supplies. U.S. rice imports in 2005/06 are projected at 15 million cwt. The bulk of U.S. rice imports are fragrant rices from Asia not currently grown in the United States. Thailand is the largest supplier of rice to the United States, shipping mostly its premium ‘jasmine’ rice. Total supplies of long grain rice are projected to increase 9 percent in 2005/06 to a record 207.1 million cwt. A large carryin, a bumper crop, and record imports all support projections for record long grain supplies. The medium/short grain supply outlook for 2005/06 is quite different from the long grain outlook. Medium/short grain supplies are projected to drop 15 percent to 65.1 million cwt, the smallest since 1999/2000. A big drop in production is projected to more than offset a larger carryin and increased imports. Total Rice Use in 2005/06 Is Projected To Increase Nearly 8 Percent Total rice use--domestic and residual use plus exports--in 2005/06 is projected at 247.2 million cwt, up 17.2 million cwt from a year earlier and the highest on record. Both domestic and residual use and exports are projected to be higher in 2005/06. Total domestic use--including the residual, or unreported losses in transporting, processing, and marketing plus any statistical errors--is projected to increase more than 5 percent to a record 126.2 million cwt. U.S. rice exports are projected at 121 million cwt (rough equivalent of both rough and milled rice exports), up 10 percent from a year earlier. Exports are second only to the record 124.6 million cwt shipped in 2002/03. Record U.S. supplies and an expected smaller price difference over Asian competitors are behind expectations of near-record U.S. rice exports in 2005/06. U.S. rough rice exports for 2005/06 are projected at 36 million cwt, up more than 2 percent from a year earlier but still 16 percent below the 2002/03 record. Mexico and Central America-- the two largest markets for U.S. rough rice--are projected to account for most of the growth in 2005/06. Combined milled and brown rice exports (on a rough basis) are projected at a record 85 million cwt in 2005/06, up nearly 10 million cwt from a year earlier. Long grain accounts for all of the projected increase in total rice use in 2005/06. Total use of long grain rice is projected at a record 188.1 million cwt, up almost 13 percent from a year earlier. Both exports and domestic use of long grain rice are projected higher in 2005/06. In contrast to the U.S. long grain market, total use of U.S. medium/short grain rice in 2005/06 is projected to decline 6 percent to 59.1 million cwt. Both domestic use and exports are projected to be smaller in 2005/06. Tight supplies and much higher prices account for the expected decline in medium/short grain use. The Middle East and Oceania are expected to account for most of the year-to-year decline in U.S. medium/short grain exports. U.S. 2005/06 Ending Stocks Are Projected To Decline 30 Percent to 26.2 Million Cwt U.S. ending stocks for 2005/06 are projected at 26.2 million cwt, down 11.5 million cwt from a year earlier. The resulting stocks-to-use ratio is projected at 10.6 percent, down from 16.4 percent a year earlier and the lowest since 1980/81. The ending stocks’ situation is different by class. Medium/short grain ending stocks are projected to decline 57 percent to 6 million cwt, the lowest since at least 1982/83 when USDA first started reporting supply and use tables by class. Prices for U.S. medium/short grain rice will face substantial upward price pressure throughout the 2005/06 market year. For long grain rice, ending stocks for 2005/06 are projected at 19.1 million cwt, down 16 percent from a year earlier but still well above levels estimated for 2000/01 and 2003/04. Despite the projected 3.6-million-cwt decline on long grain ending stocks, only a modest increase in long grain prices is likely in 2005/06. The main factor expected to push U.S. long grain prices up in 2005/06 is higher world prices. The 2005/06 U.S. season-average farm price (SAFP) is projected at $7.75 to $8.05 per cwt, up from $7.33 a year earlier. The higher U.S. SAFP in 2005/06 is primarily due to a 15-percent drop in U.S. medium/short supplies and higher global trading prices, especially for medium grain. Global trading prices for all rice are expected to increase for a second consecutive year due to tighter world supplies and higher prices for this year’s intervention purchases of rough rice by the Government of Thailand. Through mid-October 2005, the simple-average of U.S. monthly reported cash prices--including any remaining 2004-crop sales--was $6.78 per cwt, well below the projected SAFP for 2005/06, indicating U.S. prices will have to increase during the remainder of the market year. Despite Larger World Production, Global Rice Supplies Are Projected To Decline 2 Percent in 2005/06 World rice production is projected at 406.1 million tons (milled basis) in 2005/06, up 1 percent from a year earlier but still fractionally below the 1999/2000 record of 408.8 million tons. Despite larger production in 2005/06, global rice supplies are projected to decline 2 percent to 478.9 million tons, the smallest since 1993/94. This is the fourth consecutive year of declining global rice supplies. China, the world’s largest rice producing country, accounts for the bulk of the 2005/06 global production increase, with China’s rice production projected to increase almost 2 percent to 127.4 million tons (milled basis). China maintained the same grain policy in 2005 it adopted a year earlier that provided direct subsidies to farmers to grow rice and eliminated some taxes on grain producers. In addition to China, crops are projected to be larger in 2005/06 in Bangladesh, Burma, Thailand, Nigeria, Australia, the Philippines, Indonesia, Pakistan, and Sri Lanka. In contrast, Brazil, South Korea, the United States, and the EU- 25 are projected to harvest smaller crops in 2005/06. World rice consumption--including a residual component that represents unaccounted losses and any statistical errors--is projected at 414.2 million tons in 2005/06, about 1 million tons below a year earlier and nearly 1.4 million tons below the 2003/04 record. India accounts for most of the projected consumption decrease in 2005/06. India’s consumption forecast includes a substantial residual term. The residual term is impossible to estimate for India or any other country. In addition to India, rice consumption is projected to slightly decline in 2005/06 in Japan and South Korea--a long-term trend in both countries, a result of income-driven diet diversification. With consumption exceeding production in 2005/06 by 8.1 million tons, global rice ending stocks are projected to drop 11 percent to 64.6 million tons. This is the fifth consecutive year of declining global ending stocks and the lowest ending stocks since 1982/83. The global stocks-to-use ratio is projected at 15.6 percent, down from 17.5 percent a year earlier and the smallest since 1974/75. China accounts for the biggest share of this year’s expected reduction in global ending stocks. China’s ending stocks have declined each year since 1999/2000. Ending stocks are also projected to decline in Brazil, Vietnam, and the United States. Global Rice Trade Is Projected To Decline 8 Percent in 2006 World trade is projected at 25.5 million tons in calendar year 2006, an 8-percent drop from a year earlier and more than 8- percent smaller than the 2002 record of 27.8 million tons. A decline in imports by several major buyers--primarily the Philippines, Sub-Saharan Africa, Bangladesh, Saudi Arabia, and Indonesia--is the major factor pulling global rice trade down in 2006. These reductions are partially offset by increased imports by Brazil, Iraq, and South Korea. On the export side, weaker shipments from India, Vietnam, Pakistan, China, and Egypt are projected to more than offset stronger shipments from Thailand, Argentina, Australia, and Uruguay. In 2005, global rice trade is projected to increase 2 percent to 27.7 million tons, fractionally below the 2002 record. Expanded shipments from India, the United States, Pakistan, Egypt, and Argentina are projected to more than offset a 2.9-million-ton drop in Thailand’s exports and weaker shipments from China and Uruguay. Among the major importers, larger imports by the Philippines, Sub-Saharan Africa, Indonesia, Cuba, Iraq, and Turkey are projected to more than offset reduced imports by China, Brazil, Saudi Arabia, Sri Lanka, and the United States. Global trading prices are currently up about 5 percent from a year earlier, primarily due to tighter global supplies in 2005/06. For the week ending November 21, Thailand’s 100 percent Grade B (FOB vessel, Bangkok) was quoted at $282 per ton, up $13 from a year earlier. Prices had exceeded $300 per ton last spring, as Thailand was holding substantial amounts of its 2004/05 main-season rough rice crop off the market. Prices began to drop by late spring due to a record winter-spring harvest in Vietnam and lack of demand for Thailand’s rice due to more competitive prices from Vietnam. Thailand’s prices dropped further in October in anticipation of a bumper main-season harvest that began this month. Prices have continued to decline through the third week of November. Vietnam is not making any new sales at this time. Vietnam halted quoting export prices in mid-October, a result of tight supplies until its winter-spring harvest begins in March and a record level of sales already on the books. Price quotes for Vietnam’s 5 percent brokens (FOB Ho Chi Minh City) were reported at $268 per ton for the week ending October 18, up $38 from July. Vietnam is projected to export a record 5 million tons of rice in 2005, a result of competitive prices and a record 2004/05 crop. Vietnam has supplied several markets--especially the Philippines--formerly supplied by Thailand due to more competitive prices and ample supplies. India is quoting mostly export prices for its parboiled rice and basmati rice, not its lower-quality coarse rice. India entered the 2005/06 market year with extremely tight supplies. With the harvest of its main-season kharif crop nearly over, the Government of India will soon reassess its supply situation and set export prices. Pakistan--which just harvested a near-record crop--is currently more competitive than India in the low- quality 25 percent brokens coarse rice market. Similar to Thailand’s intervention purchase program for rough rice, the Government of India purchases milled rice to support prices. The U.S. export price situation varies somewhat by class of rice. Prices for U.S. long grain milled rice--No. 2, 4-percent brokens, (FAS vessel, U.S. Gulf port)--have increased 11 percent since early August. Price increases in September and October were partly due to supply disruptions caused by Hurricanes Katrina and Rita. Price movements the remainder of the market year will be impacted by much higher fuel costs and expectations of stronger global prices. For the week ending November 22, the U.S. price was quoted at $309 per ton, up from $278 at the start of the 2005/06 market year. Price quotes for U.S. California medium grain milled rice have increased sharply since last spring in response to expectations of a much smaller California harvest, a big drop in U.S. medium grain supplies in 2005/06, and a record pace of U.S. medium grain exports in 2004/05. For the week ending November 22, export prices for No. 1, 4-percent brokens California medium grain milled rice (sacked, FOB vessel, Oakland) were quoted at $515 per ton, up from $330 in late May.