RICE OUTLOOK March 13, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- RICE OUTLOOK is published monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. RCS--0396. ----------------------------------------------------------------------------- MONTHLY HIGHLIGHTS: o USDA has raised its projected range for the 1995/96 season average farm price by $0.25 at the lower end of the range and $0.05 and the upper end to $8.50 to $9.30 per cwt because of high domestic prices in the first 7 months of the marketing year and continued strong international prices. o On February 16, Agriculture Secretary Glickman announced "interim provisions" for the 1996 rice program including a nonrecourse loan rate at a proposed minimum price support rate of $9.50 per hundredweight. o World trade for 1996 is projected at 17.7 million tons, up 0.1 million from last month on larger import projections for Bangladesh, Sri Lanka, and Peru. NEAR-TERM PRICE OUTLOOK: UNCERTAIN ON U.S. FARM BILL OUTCOME The 1995/96 season average farm price (SAFP) is forecast at $8.50 to $9.30 per cwt, up substantially from 1994/95's $6.78. Continued strong world import demand, tight international long-grain supplies (particularly high-quality long grain) and high prices, and a small 1995 U.S. crop continue to support U.S. long-grain export and farm prices. Strong buying by the Philippines and Iran are supporting Asian rice prices despite good harvests throughout Asia. Continued high domestic prices in the first 7 months of the marketing year also influenced the upward revision of 1995/96's SAFP estimated range. Through the first 7 months, the U.S. monthly weighted average farm price equaled $8.81 per cwt and the simple average farm price equaled $8.77 per cwt. In March, USDA estimated February's mid-month farm price at $9.23 per cwt. In addition, the January estimate was revised to $9.33, from a preliminary $9.27. Farm prices must average about $9.03 for the remainder of the marketing year for the SAFP to equal the midpoint ($8.90) of the projected range. On February 16, Agriculture Secretary Glickman announced "interim provisions" for the 1996 rice program including a nonrecourse loan rate at a proposed minimum price support rate of $9.50 per cwt. The marketing loan repayment provisions adopted under the 1985 farm legislation would also remain in place. However, Secretary Glickman announced that these interim provisions only represent an "insurance policy" in the event that no other legislation is passed, and would be immediately superseded by and replaced with the passage of a new farm bill. The Senate and the House have each passed a version of a farm bill. While the commodity provisions in each version of the bill are similar, there remain differences about several aspects, including conservation, rural development, and nutrition provisions. A conference committee is likely to meet this week to draft a version that can be passed by both the Senate and the House and sent to the President for signature. Both bills contain many provisions regarding contract payments and acreage use. Here are some of the major provisions. Both versions of the farm bill eliminate target prices and deficiency payments. Instead, USDA will have the authority to offer market transition contracts for rice, beginning in 1996. Payments would be fixed in advance and decline over the 7-year duration of the new farm legislation. The Senate bill provides $17 million more per year for rice producers than does the House bill. The House bill reduces the amount available for rice contract payments over the 7 years by the amount that rice producers will have to repay for advanced deficiency payments in 1995/96, totaling over $170 million. These differences will have to be resolved in the conference committee. To be eligible to enter into a contract, producers must have participated in a production adjustment program for at least one of the crop years between 1991 and 1995. Payments will be limited to $40,000 per person, $10,000 less than the current limit of $50,000. Producers' planting flexibility will increase because producers will be able to plant any crop, except fruits and vegetables, or leave land idle and still receive contract payments. The basic nonrecourse commodity loans will be retained, although for rice, the loan rate will be frozen at the 1995 level. Marketing loan provisions will be retained. The Acreage Reduction Program (ARP) and the 50-85 program will be eliminated. Both versions of the bill state that producers must sign up for the transition contracts by April 15th. Because the farm bill has not yet been passed or signed by the President, however, the April 15th sign-up date could be revised. The declining benefits under the proposed farm program legislation would likely result in declining 1996 acreage and production, and higher domestic prices. This expectation is already being reflected in the market as buyers and sellers anticipate prices moving even higher in the future. U.S. f.o.b., No. 2, 4-percent broken (high-quality long-grain) offer quotes out of Houston have declined to $397 per ton in early March, down from $441 in November. Similar type and quality Thai rice (100 percent, grade B) f.o.b. offer quotes out of Bangkok strengthened to $376 per ton, up from $347 in December. The recent weakness in U.S. export prices and the strength in Thai prices have tightened the high-quality long-grain price premium of U.S. rice over Thai rice to $21 per ton, down from $72 in December and $87 in November. Traditionally, U.S. rice is thought to be competitive in international markets with a premium of $30-50 over Thai rice. U.S. medium grain prices (No. 1, 4-percent broken, f.o.b. California) have narrowed to a premium of $66 per ton over U.S. long grain (No. 2, 4-percent broken, f.o.b. Gulf port) in early March, partly, because Japan has not been in the market for rice this month, after having made large purchases earlier in the year. LONG-TERM PRICE OUTLOOK: STEADY TO WEAKER International rice prices, supported through the summer and fall by large Asian demand and tight international supplies, are projected to weaken in 1996 as the outlook for good harvests in Asia is expected to reduce demand and increase exportable supplies. However, the timing of the expected price weakness remains less clear. Lower-quality prices have already shown some weakness as A.1 Special (100 percent broken), f.o.b. Bangkok, price quotes fell to $256 per ton in early March, down from $296 in November. The November price was the highest recorded for A.1 Special in the 10 years of available data. However, strong demand from the Philippines and Bangladesh, continued Indonesian buying, and recent reports of China's purchases of low quality rice from Burma have temporarily abated the decline in lower-quality prices. Minimal 1994/95 ending stocks in Thailand and a reduced U.S. crop have kept high-quality stocks fairly tight entering 1996, despite an estimated near- record Thai main-season harvest in November. As a result, the high-quality price premium measured by the difference between Bangkok's f.o.b price quotes for 100-percent grade B and A.1 Special has risen to $120 per ton. In 1994/95 the high-quality price premium averaged $58 per ton. The next major factor that could contribute to the expected market weakness (particularly the high-quality market) involves the development of Thailand's off-season rice crop (harvested in May-June). Thailand is projected to produce a record second crop in 1996. Thailand's second crop is entirely irrigated and destined principally for export markets. INTERNATIONAL TRADE AND PRODUCTION OUTLOOK FOR 1995/96 The 1995/96 world rice supply, demand, and trade projections are up slightly from last month. Global production (milled basis) is projected at a record 369.9 million tons, 8 million above last year's record. Projected world consumption of 369.7 million tons is only slightly above last year and exports in 1996 are expected to fall. Larger production is expected to push global ending stocks to a projected 49.6 million tons, just over last year. This month's change in global supply and use is mainly in Thailand, Australia, and the Philippines, where larger production is anticipated. However, production in Bangladesh is forecast down from a month ago. Thailand's projected 1995/96 rice production has been increased to 14.4 million tons, compared with 14.1 million last year. Thailand's second rice crop area is projected to be even larger than the all time high forecast last month. However, with global trade projected down from 1995, Thailand's projected exports remain unchanged this month at 5.5 million tons for 1996, down 7 percent from 1995. Australia's 1995/96 rice area was raised based on Australian Bureau of Agricultural and Resource Economics projections. USDA projects Australia's production at 900,000 tons (up 40,000 tons from last month). Australia is expected to take advantage of strong global demand for medium grain rice and increase 1996 exports, now forecast at 615,000 tons. Australia's area, production, and exports are all forecast to be record high. Projected Philippine imports remain unchanged at 1 million tons, most of which have been purchased for shipment later in the year. In addition, larger than anticipated area was planted to the second rice crop and total production is projected at 7 million tons 1995/96 (up 175,000 from last month). Imports and the larger outturn will help stabilize prices until the 1996/97 main crop is harvested in November. World trade in 1996 is projected at 17.7 million tons, fractionally above last month, but 13 percent below last year's record, as Bangladesh, China, and Iran significantly reduce imports. The month-to-month change reflects an increase in Bangladesh's projected imports to 750,000 tons (up 250,000 tons), because flooding last August apparently did greater than expected damage to rice in low-lying areas, particularly to the second, or "aus," crop which was harvested in fall and early-winter. U.S. SITUATION AND OUTLOOK USDA's final estimate of the 1995 U.S. rice crop was reported in January at 173.9 million cwt, down 12 percent from 1994's record 197.8 million. National average yields are estimated at 5,621 pounds per acre, 5.8 percent below the 1994 record. Rice plantings in 1995 are estimated at 3.121 million acres. The outlook for 1996 remains highly dependent on how producers will react to Secretary Glickman's announcement of a $9.50 loan rate and proposed farm bill provisions. USDA's first indication of producer planting intentions for the 1996/97 U.S. rice crop will be in the Prospective Plantings report released on March 29, 1996. 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. Total 1995/96 domestic use is forecast at a record 104.2 million cwt on the strength of 4 percent growth in food use to a record 77 million cwt. U.S. rice exports and sales commitments combined are running 21 percent behind last year's pace through the first 7 months of 1995/96, according to the U.S. Export Sales Report of March 7, 1996. However, pace-to-date remains supportive of USDA's 1995/96 U.S. export estimate of 84 million cwt. Lower production and continued strong domestic use and exports are expected to reduce 1995/96 U.S. rice ending stocks to 24.6 million cwt (rough), down 22 percent from a year earlier. These represent 13.1 percent of total use, the lowest since 1980/81. ****************************************************************************** * INFORMATION CONTACTS AT THE ECONOMIC RESEARCH SERVICE: * * * * Sara J. Schwartz, domestic (202) 219-0768 * * Carol Whitton, international (202) 219-0825 * * * * Next month's Rice Outlook will be available on April 12, 1996. * ****************************************************************************** NOTE: USDA's estimates of Indonesia's production, consumption, and trade were revised back to 1980. Indonesia produces several crops of rice each year. This change more accurately links the volume of rice consumed and imported in a given calendar year to the rice crops produced for that calendar year. Also, USDA's estimates of the United Arab Emirates' (UAE) and Iran's rice consumption, imports, and stocks were also revised back to 1980. Some rice that had been reported as UAE imports was actually shipped or transshipped to Iran. The new series reflects more accurately each country's imports. Tables: Table 1- U.S. rice supply and use, 1989/90 to present Table 2- U.S. monthly average farm prices and marketings, 1993/94 to present Table 3- USDA calculated world market rice prices, 1993/94 to present Table 4- U.S. exports and sales commitments, 1989/90 to present Table 5- U.S. and Thailand f.o.b. export prices, 1986/87 to present Table 6- U.S. rice supply and use, by type, 1989/90 to 1995/96. Table 1- U.S. rice supply and use, 1989/90 to present 1/ ============================================================================== | | 1995/96 Item | 1989/90 1990/91 1991/92 1992/93 1993/94 | 1994/95 2/ ============================================================================== | | TOTAL RICE | Percent | ARP | 25 20 5 0 5 | 0 5 | | Area | Million acres | Planted | 2.731 2.897 2.884 3.176 2.920 | 3.353 3.121 Harvested | 2.687 2.823 2.781 3.132 2.833 | 3.316 3.093 | | | Pounds per harvested acre | Yield | 5,749 5,529 5,731 5,736 5,510 | 5,964 5,621 | | | Million hundredweight | Beg. stocks | 26.7 26.3 24.6 27.4 39.4 | 25.8 31.4 Production | 154.5 156.1 159.4 179.7 156.1 | 197.8 173.9 Imports | 4.4 4.8 5.3 6.1 6.9 | 7.0 7.5 Total supply| 185.6 187.2 189.2 213.2 202.5 | 230.6 212.8 | | Food | 60.2 63.7 67.1 69.0 71.2 | 74.0 77.0 Seed | 3.6 3.6 3.9 3.6 4.2 | 4.1 4.1 Brewer's use | 15.4 15.3 15.4 15.1 15.1 | 15.1 15.1 Residual 3/ | 3.0 9.0 9.0 9.0 11.0 | 5.1 8.0 Domestic use| 82.2 91.6 95.4 96.7 101.5 | 98.3 104.2 | | Exports | 77.1 71.0 66.4 77.0 75.2 | 100.9 84.0 Rough | 4.8 6.3 5.1 3.6 | 18.5 8.0 Mld(rgh eq)| 66.2 60.1 71.9 71.5 | 82.4 76.0 Total use | 159.3 162.6 161.8 173.7 176.7 | 199.2 188.2 | | End. stocks | 26.3 24.6 27.4 39.4 25.8 | 31.4 24.6 CCC inv. | 0.0 0.1 0.4 0.1 0.0 | 0.1 0.0 Free stocks | 26.3 24.5 27.0 39.3 25.8 | 31.3 24.6 | | | Percent | Stocks-use | 16.5 15.1 16.9 22.7 14.6 | 15.8 13.1 | | Average farm | $/cwt | 8.50 price 4/ | 7.35 6.68 7.58 5.89 7.98 | 6.78 -9.30 | | Average | Percent | milling rate | 72.6 72.0 70.5 70.0 74.0 | 73.0 72.0 ============================================================================== 1/ Marketing year (August 1 to July 31); rough equivalent of rough and milled rice. 2/ Projected. 3/ Residual: unreported use, processing losses, and estimating errors. 4/ Marketing year weighted average price received. Table 2- U.S. monthly average farm prices and marketings, rough equivalent, 1993/94 to present ============================================================================= | 1995/96 1994/95 1993/94 | -------------------- ------------------- ------------------- Month | $/cwt 1,000 cwt $/cwt 1,000 cwt $/cwt 1,000 cwt ============================================================================= Aug | 7.64 9,935 6.87 11,534 5.19 12,411 Sep | 7.92 12,010 6.89 12,610 5.21 12,950 Oct | 8.77 12,493 6.47 13,381 6.10 14,804 Nov | 9.12 12,951 6.53 15,470 8.06 15,228 Dec | 9.36 12,503 6.56 17,479 8.91 12,722 Jan | 9.33 13,130 6.78 17,781 8.98 14,106 Feb | 9.23 1/ 12,170 6.71 16,050 10.10 9,750 Mar | 6.64 17,565 10.20 11,594 Apr | 6.70 12,425 9.93 8,113 May | 6.75 16,848 10.00 7,854 Jun | 7.03 13,793 8.88 8,708 Jul | 7.17 9,847 7.80 7,986 | Average 2/ | 8.81 12,170 6.78 14,565 7.98 11,352 Total 3/ | 8.50-9.30 4/ 174,783 5/ 136,226 ============================================================================= 1/ Preliminary midmonth price estimate. 2/ Price is marketing year weighted average; 1995/96 is for August to current month. 3/ Total volume marketed. 4/ 1995/96 price range is a USDA projection. 5/ Preliminary final 1994/95 marketings available in July 1996. Table 3- USDA calculated world market rice prices, 1993/94 to present 1/ ============================================================================ | 1995/96 1994/95 1993/94 Month 2/| -------------------- -------------------- -------------------- | Long Medium Short Long Medium Short Long Medium Short ============================================================================ | $/cwt Aug | 7.93 6.22 6.06 5.33 5.64 5.33 4.11 3.76 3.57 Sep | 8.02 6.30 6.13 5.62 5.67 5.36 4.20 3.84 3.65 Oct | 8.81 6.67 6.51 5.74 5.61 5.32 4.88 4.48 4.26 Nov | 8.47 6.82 6.63 5.85 5.59 5.31 6.56 6.15 5.86 Dec | 8.17 7.16 6.95 5.82 5.59 5.31 7.26 6.85 6.53 Jan | 8.11 7.19 7.13 6.21 5.62 5.58 7.35 7.00 6.73 Feb | 7.90 7.49 7.67 6.41 5.70 5.66 7.49 7.31 7.20 Mar 3/| 7.88 7.37 7.55 6.41 5.74 5.70 7.29 7.30 7.18 Apr | 6.41 5.74 5.70 6.48 7.25 7.11 May | 6.56 5.87 5.82 5.91 7.19 7.03 Jun | 7.38 6.03 6.00 5.32 7.05 6.87 Jul | 7.63 6.10 6.06 5.22 6.27 6.12 | Average 2/| 8.16 6.90 6.83 6.28 5.74 5.59 6.00 6.20 6.01 ============================================================================ 1/ Loan rate basis (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/ Preliminary. The 1995/96 average is for August to current month. Table 4- U.S. exports and sales commitments, 1989/90 to present 1/ ============================================================================== |1995/96 |1994/95 | Country |--------|--------1994/95 |1993/94 1992/93 1991/92 1990/91 1989/90 or | as of | as of | region |02/29/96|02/28/95 Final | Final Final Final Final Final ============================================================================== | | | 1,000 metric tons Eur. Union | 278 | 365 474 | 362 362 263 383 359 O W Eur | 144 | 186 22 | 18 47 44 46 40 Turkey | 130 | 167 259 | 67 191 154 153 138 East Eur. | 31 | 33 58 | 10 46 39 30 20 FSU | 16 | 19 18 | 4 15 42 0 0 | | | Japan | 191 | 1 2 | 568 0 0 0 0 | | | OTH ASIA/ME| 326 | 385 527 | 349 438 228 304 613 Iran | 72 | 126 191 | 121 130 7 0 0 Iraq | 0 | 0 0 | 0 0 0 0 299 S. Arabia | 128 | 125 153 | 157 205 146 180 145 | | | AFRICA | 262 | 209 257 | 258 315 244 316 299 Cote d'Iv.| 88 | 41 57 | 67 92 56 78 35 Senegal | 5 | 26 28 | 75 87 37 62 57 RSA | 85 | 109 113 | 90 111 103 87 103 | | | W HEMIS. | 611 | 1,097 1,585 | 513 663 771 779 656 Canada | 78 | 103 127 | 91 98 88 109 96 Mexico | 164 | 168 327 | 177 249 118 87 198 Haiti | 86 | 60 148 | 43 117 97 34 17 Jamaica | 59 | 43 74 | 63 30 56 74 68 Brazil | 2 | 363 368 | 12 0 187 295 0 | | | Total | 1,861 | 2,367 3,201 | 2,149 2,075 1,783 2,009 2,137 ------------------------------------------------------------------------------ Census 2/ |2,743 4/| 3,324 | 2,523 2,443 2,113 2,300 2,532 Diff. 3/ |294 5/| 123 | 373 367 329 291 396 ============================================================================== Note: "U.S. Export Sales" reports sales and shipments in product weight. The milled equivalent total may vary significantly from year to year based on the share of rough rice exports. 1/ Columns labeled "Final" represent final exports as reported by "U.S. Export Sales", FAS, USDA. Columns labeled "as of" represent combined exports plus sales commitments. 2/ The U.S. Census Bureau rice export total (reported on a milled equivalent basis) is the official export total. 3/ The "U.S. Export Sales" does not include U.S. Government exports under under PL 480 Titles II and III, Section 416, and Food for Peace exports. 4/ USDA forecast, milled equivalent. 5/ The average difference between the Census and "U.S. Export Sales" for 1990/91-1994/95. Table 5- U.S. and Thailand f.o.b. export prices, 1986/87 to present ============================================================================== Month | U.S. 2/ Bangkok, long grain 5/ or | ------------------------- --------------------------------------- marketing | LG 3/ MG 4/ Parboiled 100% 5% par- 15% 35% A.1 6/ year 1/ | Houston Calif. Houston grade B boiled broken broken special ============================================================================== | $/metric ton 7/ 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 1992/93 | 322 383 349 244 227 217 193 163 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 | 298 397 331 270 259 250 237 222 Jan '95 | 298 366 331 282 264 265 252 232 Feb '95 | 298 358 342 289 266 270 255 226 Mar '95 | 298 353 342 292 269 272 253 222 Apr '95 | 298 353 342 290 269 271 254 226 May '95 | 311 353 346 299 274 279 262 239 Jun '95 | 358 353 380 333 305 314 297 276 Jul '95 | 392 353 406 353 341 335 321 297 1994/95 | 314 375 348 290 276 270 255 232 | Aug '95 | 386 364 419 346 343 327 310 288 Sep '95 | 386 380 424 368 354 346 322 285 Oct '95 | 430 432 485 393 373 372 340 293 Nov '95 | 441 441 463 354 342 334 315 296 Dec '95 | 419 496 463 347 337 326 307 278 Jan '96 | 410 507 454 372 355 350 321 271 Feb '96 | 402 474 449 377 357 348 307 256 Mar '96 8/| 397 463 441 376 354 348 303 256 Apr '96 | May '96 | Jun '96 | Jul '96 | 1995/96 9/| 409 445 450 367 352 344 316 278 ============================================================================== NA = Not available. 1/ Simple average of weekly price quotes. 2/ Lowest quote offered. 3/ Number 2, 4 percent. 4/ Number 1, 4 percent. 5/ Nominal price quotes collected by the U.S. embassy, Bangkok. 6/ 100 percent broken. 7/ Bagged, f.o.b. mills. 8/ Preliminary data. 9/ Preliminary. Table 6- U.S. rice supply and use, by type, 1989/90 to present 1/ ============================================================================== | | 1995/96 Item | 1989/90 1990/91 1991/92 1992/93 1993/94 | 1994/95 2/ ============================================================================== LONG-GRAIN | | | Million acres | Planted | 2.031 2.129 2.113 2.408 2.102 | 2.410 2.335 Harvested | 1.998 2.065 2.023 2.372 2.028 | 2.379 2.312 | Pounds per harvested acre | Yield | 5,464 5,221 5,395 5,397 5,082 | 5,609 5,265 | Million hundredweight | Beg. stocks | 15.4 13.2 11.5 13.0 21.6 | 15.1 14.5 Production | 109.2 107.8 109.1 128.0 103.1 | 133.4 121.7 Imports | 4.0 4.3 4.7 5.4 6.2 | 6.0 6.5 Total supply| 128.6 125.3 125.4 146.4 130.9 | 154.5 142.7 | | Dom. use 3/ | 54.5 57.8 61.4 60.8 67.2 | 59.0 65.0 Exports | 60.8 56.0 51.0 64.0 48.6 | 81.0 64.0 Total use | 115.3 113.8 112.4 124.8 115.8 | 140.0 129.0 | | End. stocks | 13.2 11.5 13.0 21.6 15.1 | 14.5 13.7 | Percent | Stocks-use | 11.5 10.1 11.6 17.3 13.0 | 10.3 10.6 ------------------------------------------------------------------------------ MEDIUM & SHORT-GRAIN | | Million acres | Planted | 0.700 0.768 0.771 0.768 0.818 | 0.943 0.786 Harvested | 0.689 0.758 0.758 0.760 0.805 | 0.937 0.781 | Pounds per harvested acre | Yield | 6,579 6,370 6,627 6,795 6,590 | 6,866 6,676 | Million hundredweight | Beg. stocks | 9.0 11.6 11.7 12.9 15.8 | 10.0 15.8 Production | 45.3 48.3 50.2 51.6 53.0 | 64.3 52.1 Imports | 0.4 0.5 0.6 0.7 0.7 | 1.0 1.0 Total supply| 55.6 60.5 62.4 64.8 70.9 | 74.9 69.4 | | Dom. use 3/ | 27.7 33.8 34.1 35.9 34.3 | 39.2 39.2 Exports | 16.3 15.0 15.4 13.0 26.6 | 19.9 20.0 Total use | 44.0 48.8 49.5 48.9 60.9 | 59.1 59.2 | | End. stocks | 11.6 11.7 12.9 15.8 10.0 | 15.8 10.2 | Percent | Stocks-use | 26.5 24.0 26.1 32.4 16.4 | 26.8 17.2 ------------------------------------------------------------------------------ End. stocks | | difference 1/| 2.4 1.4 1.4 2.0 0.7 | 1.1 0.7 ============================================================================== 1/ Stock totals by type omit brokens, screenings, and brewers. These are included in the totals for all types in table 1. 2/ Projected. 3/ Includes residual. END-END-END