------------------- rcs-0195.asc follows -------------------- Rice Outlook Report, RCS-0195 Economic Research Service, USDA ------------------------------------------------------------------------------- Approved by the World Agricultural Outlook Board January 12, 1994 ------------------------------------------------------------------------------- I. DOMESTIC AND INTERNATIONAL PRICE OUTLOOK & MARKET SUMMARY NEAR TERM PRICE OUTLOOK: 1- U.S. farm and export prices for rice, along with internationally traded rice prices, are projected steady to slightly lower from current levels during the first quarter of 1995. Large rice crops from Thailand and Vietnam coming to market in January and February are expected to offset large import demand from Indonesia and China. 2- Strong Indonesian demand for low-quality rice and unexpected strong demand for intermediate- and higher-quality rice from China have supported Asian rice prices since November. 3- Thailand is expected to harvest a record 18.0-million-ton 1994 main-season crop in December-January. Vietnam is projected to harvest a record 14.75 million tons in 1994/95. This includes a large main-season crop of 9.8 million tons whose harvest is expected to begin by the end of January, adding new pressure to prices. 4- A drought-reduced summer crop and a late start for main-season rains for Java's principal rice crop are behind Indonesia's 1994/95 import demand of 1.6 million tons. Indonesia traditionally buys low-quality long-grain rice because of the lower price. Stronger low-quality prices provide a floor for high-quality long-grain prices in Thailand and Vietnam, thus propping up Asian long-grain prices. 5- Pre-harvest low stocks in Thailand, and October flooding in Vietnam (during Vietnam's off-season harvest and main-season planting) limited Indonesia's ability to procure rice in late 1994, thus supporting market prices prior to Asian harvests. Apart from large over-the-border trade with China, Vietnam is not expected to begin major export activity until mid-February. In addition, recent port congestion in Rangoon and Karachi has shifted most near-term import demand to Bangkok, supporting Thai prices near current levels despite the expected record main-season Thai harvest. YEAR-TO-YEAR PRICE OUTLOOK: 6- U.S. farm and export prices for rice, along with internationally traded prices, are projected sharply lower in 1994/95 on the outlook for record world production, abundant global export supplies, and falling world demand in 1995. 7- Total world production (milled basis) is projected up at a record 353.8 million tons for 1994/95 (versus 350.9 in 1993/94) including larger foreign production of 347.5 million tons (versus 345.9) and a record U.S. rice crop of 6.3 million tons (versus 5.0). 8- The outlook for increased global production implies both lower import demand and greater export competition. World trade is forecast at 14.9 million tons in 1995, down 7 percent from 1994's expected record 16.0 million tons. 9- As international prices fall, weaker, more-price-sensitive markets may increase their rice purchases, limiting the decline in volume of rice traded; however, average unit-value is expected to be substantially lower following the reduction in Japan's high-valued purchases. 10-Record imports of 2.3 million tons, along with an estimated bumper crop of 10.9 million tons in 1994, is expected to limit Japan's 1995 rice imports to 300,000 tons, comprised primarily of the UR-GATT minimum access criteria. 11-Production for the major rice exporting countries of Burma, Thailand, Vietnam, and the United States is projected up 2.8 million tons at 43.8 million in 1994/95, signaling sharp competition for a smaller export market. MAJOR UNCERTAINTIES 12-Indonesia's 1994/95 import needs are currently estimated at 1.6 million tons. A return to trend growth in yields and production under normal weather in 1994/95 would significantly reduce import needs by mid-1995. However, Indonesia's burgeoning population leaves little margin for production shortfalls. 13-The timing of Japan's 1995/96 UR-GATT rice imports of 379,000 tons is unclear. Japan's large 1994 harvest suggests that these imports would be made later rather than sooner. Japan will undertake the UR-GATT rice imports beginning in its fiscal year which starts April 1, 1995. Thus, Japan could undertake its import commitments in the January-March period of 1996 and still comply with UR-GATT. 14-Current reports from Australia indicate that the Murray-Darling river system is running low following the devastating 1994 drought. Australia's rice crop depends on this river system for irrigation water. Limited irrigation water for the 1994/95 rice crop is projected to decrease yields to 7.7 tons (rough) per hectare, down 6 percent from 1993/94's record. Despite an estimated record area of 135,000 hectares planted in 1994/95, Australia is projected to produce only 745,000 tons of rice, leaving projected exports, after domestic use and stocks, of 500,000 tons, down 17 percent from 600,000 tons in 1993/94. 15-China's poor performance with low-quality japonica exports to Japan in 1994 revealed that significant infrastructural deficiencies remain to be overcome before China can successfully compete for the high-quality rice markets of Japan and South Korea. Given China's poor performance and Australia's expected decline in exportable supplies of high-quality japonica rice, the United States could capture a very large share of the looming East Asian UR- GATT market opening for rice. II. U.S. SITUATION AND OUTLOOK 17-The U.S. season average farm price for rice in 1994/95 is projected down significantly, with a range of $5.75 to $6.75 per cwt compared with 1993/94's $8.09. 18-The 1994 U.S. rice crop is estimated at a record 197.8 million cwt rough basis. Despite projected record domestic use and larger exports, the record crop is projected to increase ending stocks significantly to 42.8 million cwt, up sharply from 1993/94's 26.0 million. 19-U.S. total domestic and residual use is projected at a record 102 million cwt (rough) in 1994/95, up 5 percent from 1993/94, on the strength of continued growth in both total food use and per capita use. U.S. per capita rice use is projected at a record 22.9 pounds (milled). 20-U.S. exports are projected up 10 percent at 87 million cwt (rough) in 1994/95. On a calendar year basis, U.S. exports are projected up slightly at 2.75 million tons (milled) in 1995 versus an estimated 2.65 million in 1994, implying a larger share of world trade (18.5 versus 16.6 percent). 21-Recent increases in import demand from China and Indonesia have prevented Asian export prices from falling to their traditional large discount with U.S. export prices. The U.S. f.o.b. export price premium (U.S. Number 2, 4 percent, fob Gulf port versus Thai 100 percent, Grade B, fob Bangkok) fell to $20 per ton in early January, its lowest level in over 3 years, under record harvest pressure. Thus, the United States remains very competitive in Western Hemisphere and European markets. 22-As a result of a good competitive position, U.S. rice exports and sales commitments combined are running 38 percent ahead of last year's pace through the first 5 months of 1994/95, according to the "U.S. Export Sales Report" of January 5, 1995. 23-Through December 30, 1994, sales of rice under the Export Enhancement Program (EEP) totalled 103,640 tons for 1994/95, nearly double from 1993/94's 53,680. However, the August 10, 1994, initiative of 300,000 tons expired on December 31, 1994. No new EEP initiative for 1995 has been announced yet. 24-U.S. export prospects are expected to decline slightly in the later half of the 1994/95 marketing year under the prospect for lower Asian export prices relative to U.S. prices by mid-February. However, if Asian prices remain strong beyond February, then the U.S. may achieve even larger rice exports than the 87 million cwt (rough basis) currently projected. 25-In order to comply with the statutory ratio of 16.5 to 20.0 percent for projected ending stocks over the average total use for the 3 preceding years, a preliminary Acreage Reduction Program (ARP) of 5 percent for the 1995 crop was announced on December 2, 1994. The final ARP will be announced before January 31. 26-USDA's first indication of producer planting intentions for the 1995/96 U.S. rice crop will be in the Prospective Plantings report released on March 31, 1995. A summary of crop activity and progress by State, including the national average, will be published weekly by NASS in the Crop Progress report beginning the first week in April. III. SPECIAL TOPIC: CHINA'S 1995 RICE TRADE PROSPECTS Early projections for 1995 are for China to become a net importer of rice for the first time since 1989. Imports are projected at 750,000 tons in 1995 surpassing the 500,000 tons of projected exports. This is a dramatic change from the past 3 years when China's annual rice exports averaged 1.3 million tons while imports averaged only 0.2 million. Traditionally China exports low-quality rice to Africa and the Middle East, and imports high-quality long-grain rice, mostly from Thailand, for use in urban centers. However, in 1994, China's projected exports of 1.5 million tons include 0.9 million tons of japonica to Japan, while its 0.5 million tons of official imports included a significant share of intermediate- and low-quality rice. In addition, there have been numerous reports of unofficial rice imports from Vietnam of 400,000 to 500,000 tons. This suggests that China's actual 1994 rice imports may be near 900,000 tons. Any change in China's ability to export rice has important implications for world rice trade. There are several factors behind this dramatic reversal in trading patterns. 1- For the past 2 years, China's rice production has been trending downward. Under market-oriented reform there has been a significant decline in Government guaranteed purchases, while private markets have offered very low prices for poor-quality rice. In addition, returns to rice farming have been squeezed by escalating input costs, particularly for fertilizer and pesticides. As a result, farmers have been opting for higher returns from a switch either to alternative crops or land uses, or to higher-quality, but lower-yielding rice varieties, principally in southern rice growing areas. 2- Since market reform began 2 years ago, China's grain farmers have shown a sensitivity to rumors of price run-ups. As a result, grain farmers have been inclined to hold their grain rather than rushing to sell at harvest. 3- The Central Government of China (CGOC) has a profound fear of urban political unrest. Food shortages and rapid inflation are seen as flash points for urban unrest. During the first 11 months of 1994, inflation grew 24 percent. The CGOC pins inflation fears on escalating food prices. Large grain imports help insure urban supplies and control inflation at a time when producers appear to be holding grain off the market in hopes of higher prices later in the year. 4- Recent large-scale flooding in southern China has also contributed to some crop failure but, more importantly, to farmer's speculation concerning short- term price run-ups, thus further inducing near-term farmer stock-holding and reducing current supplies of low-quality rice to China's urban centers. 5- Given Indonesia's current large purchases of rice from the international market, the CGOC is afraid of being caught short of supplies at a critical time. As a result, the CGOC has been buying large quantities of intermediate- and low-quality rice from Thailand and Vietnam. Although current large imports appear to be a temporary phenomenon, the downward trend in domestic production caused by the CGOC market reforms, without any offsetting reduction in domestic demand, is expected to increase import demand for high-quality rice and eventually limit exportable supplies of low-quality rice. ******************************************************************************* * INFORMATION CONTACTS AT THE ECONOMIC RESEARCH SERVICE: * * * * Randall D. Schnepf, international and domestic (202) 501-8513 * * Bryan W. Just, domestic (202) 501-8524 * * * * The next Rice Monthly Outlook Report will be available on February 13, 1995.* ******************************************************************************* Note: Readers may also refer to the following ERS AutoFAX documents. 2160 "Rice Outlook and Analysis Documents." Provides a list of available data tables, reports, and miscellaneous information concerning U.S. and international rice. Interested parties may contact the ERS AutoFAX, by calling (202)219-1107, then following the instructions. Tables: Table 1- U.S. rice supply and use, 1989/90 to present. Table 2- U.S. monthly average farm prices and marketings, 1992/93 to present. Table 3- USDA calculated world market rice prices, 1992/93 to present Table 4- U.S. exports and sales commitments, 1988/89 to present. Table 5- U.S. and Thailand F.O.B. export prices, 1986/87 to present. Table 6- EEP allocations and disbursements, 1985/86 to present Table 1- U.S. rice supply and use, 1989/90 to present 1/ ============================================================================== | | 1994/95 1995/96 Item | 1989/90 1990/91 1991/92 1992/93 1993/94 | 2/ 2/ ============================================================================== | | TOTAL RICE | Percent | ARP 3/ | 25 20 5 0 5 | 0 5 | | Area | Million Acres | Planted | 2.731 2.897 2.878 3.176 2.920 | 3.353 Harvested | 2.687 2.823 2.775 3.132 2.833 | 3.316 | | | Pounds per harvested acre | Yield | 5,749 5,529 5,674 5,736 5,510 | 5,964 | | | Million hundredweight | Beg. Stocks | 26.7 26.4 24.6 27.4 39.4 | 26.0 Production | 154.5 156.1 157.5 179.7 156.1 | 197.8 Imports | 4.4 4.8 5.3 6.1 6.9 | 8.0 Total Supply| 185.6 187.2 187.3 213.2 202.5 | 231.8 | | Food | 60.02 63.8 65.2 69.0 71.3 | 74.0 Seed | 3.6 3.6 3.9 3.6 4.2 | 4.0 Brewer's use | 15.429 15.3 15.4 15.1 15.0 | 15.0 Residual 4/ | 3 9.0 9.0 9.0 6.5 | 9.0 Domestic Use| 82.0 91.7 93.5 96.7 97.0 | 102.0 | | Exports | 77.2 70.9 66.4 77.0 79.4 | 87.0 Total Use | 159.2 162.7 159.9 173.7 176.4 | 189.0 | | End. Stocks | 26.4 24.6 27.4 39.4 26.0 | 42.8 CCC inv. | 0.0 0.1 0.4 0.1 0.0 | 0.1 Free Stocks | 26.4 24.5 27.0 39.3 26.0 | 42.7 | | | Percent | Stocks-use | 16.6 15.1 17.1 22.7 14.8 | 22.7 | | Average Farm | $/cwt | Price 5/ | 7.35 6.68 7.58 5.89 8.09 | 5.75-6.75 ============================================================================== 1/ Marketing year (August 1 to July 31); rough equivalent of rough and milled rice. 2/ Projected. 3/ 1995/96 ARP is preliminary announced December 1994. The final 1995/96 ARP will be announced before January 31, 1995. 4/ Residual: unreported use, processing losses, and estimating errors. 5/ Marketing year weighted average price received by farmers. Table 2- U.S. monthly average farm prices and marketings, 1992/93-present 1/ =============================================================================== | 1992/93 1993/94 1994/95 2/ | ------------------- ------------------- --------------------- Month | $/cwt 1,000 cwt $/cwt 1,000 cwt $/cwt 1,000 cwt =============================================================================== Aug | 6.60 10,274 5.19 12,411 6.75 11,499 Sep | 6.41 12,496 5.21 12,950 6.69 12,606 Oct | 6.40 14,012 6.10 14,804 6.47 13,381 Nov | 6.42 10,844 8.06 15,228 6.53 15,548 Dec | 6.39 12,926 8.91 12,722 6.60 3/ NA Jan | 6.36 13,228 8.98 14,106 Feb | 6.06 12,940 10.10 9,750 Mar | 5.64 13,197 10.20 11,594 Apr | 5.52 11,274 9.93 8,113 May | 5.24 11,335 10.00 7,854 Jun | 5.02 12,551 8.88 8,708 Jul | 4.92 14,062 7.80 7,986 | Average 4/ | 5.89 8.09 11,352 6.60 10,607 Total 5/ | 149,139 136,226 5.75-6.75 53,034 =============================================================================== 1/ Rough equivalent basis. 2/ December price and marketings are preliminary. 3/ Preliminary mid-month price. 4/ Price is marketing year weighted average; 1994/95 is for August-December. 5/ Total volume marketed. 1994/95 average price is a USDA projection. Table 3- USDA calculated world market rice prices, 1992/93-present 1/ ============================================================================= | 1992/93 1993/94 1994/95 3/ Month 2/ | -------------------- -------------------- -------------------- | Long Medium Short Long Medium Short Long Medium Short ============================================================================= | $/cwt Aug | 5.91 5.45 5.43 4.11 3.76 3.57 5.33 5.64 5.33 Sep | 5.70 5.24 5.22 4.20 3.84 3.65 5.62 5.67 5.36 Oct | 5.53 5.05 5.02 4.88 4.48 4.26 5.72 5.61 5.32 Nov | 5.48 5.00 4.97 6.56 6.15 5.86 5.79 5.59 5.31 Dec | 5.36 4.92 4.89 7.26 6.85 6.53 5.81 5.57 5.30 Jan | 5.29 4.82 4.79 7.35 7.00 6.73 Feb | 5.23 4.72 4.69 7.49 7.31 7.20 Mar | 4.98 4.45 4.43 7.29 7.30 7.18 Apr | 4.63 4.20 4.17 6.48 7.25 7.11 May | 4.38 3.97 3.95 5.91 7.19 7.03 Jun | 4.25 3.83 3.80 5.32 7.05 6.87 Jul | 4.25 3.83 3.80 5.22 6.27 6.12 | Average 2/ | 5.08 4.62 4.60 6.00 6.20 6.01 5.65 5.62 5.32 ============================================================================= 1/ Loan rate bases (rough); repayment rates for 1989-94 crops are the higher of the world price or 70 percent of the loan rate for the specified class of rice. 2/ Simple average of weekly announced world market price. 3/ December is preliminary. The 1994/95 average is for August-December.Table 4- U.S. exports and sales commitments, 1992/93 to present 1/ =============================================================================== | | 1993/94 | 1994/95 Country |1988/89 1989/90 1990/91 1991/92 1992/93 |----------------| -------- or | | as of | as of Region | Final Final Final Final Final | Final 01/05/93| 01/05/94 =============================================================================== | 1,000 metric tons | | Eur. Union | 442 359 383 263 362 | 327 210 | 268 Oth W Eur. | 71 40 46 44 47 | 54 42 | 47 Turkey | 98 138 153 154 191 | 67 67 | 109 East Eur. | 18 20 30 39 46 | 10 10 | 30 FSU | 0 0 0 42 15 | 4 1 | 14 | | | Japan | 0 0 0 0 0 | 568 146 | 1 Iran | 0 0 0 7 130 | 121 141 | 81 Iraq | 434 299 0 0 0 | 0 0 | 0 S. Arabia | 162 145 180 146 205 | 157 107 | 80 Oth Asia/ME| 229 169 124 75 103 | 71 59 | 107 | | | Cote d'Iv. | 16 35 78 56 92 | 67 70 | 40 Senegal | 64 57 62 37 87 | 75 61 | 15 RSA | 64 103 87 103 111 | 90 72 | 76 Oth Africa | 124 104 89 47 25 | 26 27 | 17 | | | Canada | 95 96 109 88 98 | 91 75 | 78 Mexico | 58 198 87 118 249 | 177 102 | 143 Haiti | 1 17 34 97 117 | 43 15 | 38 Jamaica | 66 68 74 56 30 | 63 40 | 38 Brazil | 0 0 295 187 0 | 12 12 | 385 Peru | 27 161 25 42 34 | 3 1 | 54 Oth W Hem. | 247 116 155 184 134 | 125 70 | 196 | | | Total | 2,248 2,137 2,009 1,783 2,075 | 2,149 1,327 | 1,827 ------------------------------------------------------------------------------- Census 2/ | 2,786 2,532 2,300 2,113 2,443 | 2,523 | 2,762 4/ Diff. 3/ | 538 396 291 329 367 | 373 | 382 5/ =============================================================================== 1/ Columns labelled "Final" represent final exports as reported by the "U.S. Export Sales Report," FAS, USDA. Columns labelled "as of" represent combined exports plus sales commitments. 2/ The U.S. Census Bureau rice export total is the official export total. 3/ The "U.S. Export Sales Report" does not include U.S. Government exports under PL 480 Titles II and III, Section 416, and Food for Peace exports. 4/ USDA forecast. 5/ The average difference between the Census and Export Sales Report for 1988/89-1993/94. Table 5- U.S. and Thailand F.O.B. export prices, 1986/87 to present ============================================================================== Month | U.S. 2/ Bangkok, Long Grain 4/ or | ------------------------- --------------------------------------- Marketing | LG 3/ MG 3/ Parboiled 100% 5% Par- 15% 35% A.1 5/ Year 1/ | Houston Calif. Houston Grade B boiled Broken Broken Special ============================================================================== | Dollars per metric ton 1986/87 | 240 282 311 190 171 173 154 122 1987/88 | 421 366 486 273 261 256 236 204 1988/89 | 324 361 386 292 284 275 256 232 1989/90 | 342 352 400 292 259 262 214 172 1990/91 | 331 347 400 296 277 261 213 169 1991/92 | 368 384 418 287 263 258 222 184 | Aug '92 | 353 397 375 278 249 250 221 182 Sep '92 | 353 397 375 267 244 238 212 176 Oct '92 | 353 397 375 260 247 233 204 172 Nov '92 | 335 397 357 261 245 235 206 172 Dec '92 | 331 397 353 265 240 238 207 162 Jan '93 | 331 397 353 270 238 240 208 166 Feb '93 | 320 397 342 267 234 233 203 172 Mar '93 | 309 390 333 243 229 211 189 161 Apr '93 | 309 364 331 216 211 191 175 153 May '93 | 300 364 331 194 188 172 158 145 Jun '93 | 291 355 331 199 190 177 162 147 Jul '93 | 287 342 331 209 205 186 171 149 1992/93 | 322 383 349 244 227 217 193 163 | Aug '93 | 287 342 331 218 214 196 179 156 Sep '93 | 287 342 331 216 213 192 177 158 Oct '93 | 338 342 375 272 222 237 207 162 Nov '93 | 505 408 536 337 264 288 242 167 Dec '93 | 551 485 573 330 272 281 234 156 Jan '94 | 551 485 595 376 272 305 241 151 Feb '94 | 551 485 595 390 266 313 238 155 Mar '94 | 546 485 579 330 248 240 207 155 Apr '94 | 496 507 540 331 238 242 205 157 May '94 | 423 540 472 259 235 213 190 160 Jun '94 | 386 507 444 232 228 200 186 165 Jul '94 | 342 480 394 237 251 211 197 178 1993/94 | 439 451 480 294 244 243 208 160 | Aug '94 | 313 428 353 259 271 237 222 200 Sep '94 | 309 397 344 267 265 246 233 210 Oct '94 | 304 397 331 272 262 249 238 216 Nov '94 | 298 397 331 272 263 249 236 215 Dec '94 6/| 309 402 355 270 259 250 237 222 ============================================================================== 1/ Simple average of weekly price quotes. 2/ Lowest quote offered. 3/ Number 2, 4 percent. 4/ Nominal price quotes collected by the U.S. embassy, Bangkok. 5/ 100% broken. 6/ Preliminary data. Table 6- Marketing Year EEP allocations and disbursements, 1985/86-present =============================================================================== | EEP 1/ Sales 2/ Total Bonus Average | Used Marketing | Available Quantity Value Bonus | Share Year | (tons) (tons) (Dollars) ($/ton) | (percent) ------------------------------------------------------------------------------- 1985/86 | 40,000 22,700 1,536,336 67.68 | 56.8 1986/87 | 17,300 16,000 529,120 33.07 | 92.5 1987/88 | 131,300 122,450 12,999,072 106.16 | 93.3 1988/89 | 48,850 30,000 887,600 29.59 | 61.4 1989/90 | 0 0 0 ---- | ---- 1990/91 | 202,440 73,120 3,827,127 52.34 | 36.1 1991/92 | 533,000 322,180 21,032,786 65.28 | 60.4 1992/93 | 790,620 276,922 14,457,004 52.21 | 35.0 1993/94 | 478,698 53,680 2,422,640 45.13 | 11.2 | | 1994/95 Total 3/| 300,000 103,640 4,125,446 39.81 | 34.5 Algeria | 20,000 0 0 ---- | 0.0 Eastern Europe | 30,000 30,000 2,260,416 75.35 | 100.0 Czech Rep. | 5,100 396,250 77.70 | Hungary | 13,000 942,500 72.50 | Poland | 11,900 921,666 77.45 | FSU | 10,000 5,140 350,180 68.13 | 51.4 Israel | 25,000 5,500 329,450 59.90 | 22.0 Jordan | 45,000 0 0 ---- | 0.0 Lebanon | 10,000 10,000 250,400 25.04 | 100.0 Turkey | 160,000 53,000 935,000 17.64 | 33.1 =============================================================================== Source: FAS, USDA, press releases. 1/ Approximate initiative quantity available at start of marketing year. 2/ Shipment may occur later than sale date. 3/ The 1994/95 EEP initiative of August 10, 1994, expired on December 31, 1994; no new initiative has been announced since.