Modest growth in rice production

FAO has lowered its forecast for global rice yield due to lower rainfall in India.

The United Nations Food and Agriculture Organisation (FAO) has lowered its forecast of global rice paddy production by 7.8 million tonnes in 2012, mainly on account of a 22 p.c. lower-than-average monsoon rainfall in India through mid-July.

In its latest issue of Rice Market Monitor, the FAO said that as the season progressed, production forecasts for Bangladesh, Brazil, Cambodia, the Democratic People's Republic of Korea, the Republic of Korea, Mali, Pakistan and Sri Lanka were also downgraded.

On the positive side, the FAO said that the 2012 production forecasts in China (Mainland), Indonesia, the United Republic of Tanzania, Thailand and the United States were all scaled up.

At the new forecast level of 724.5 million tonnes, global production in 2012 would be only marginally above the excellent 2011 results, recently further revised upwards.

"The outlook is still subject to much uncertainty, especially in view of the growing probability of an El Nino event developing over the August to October period, as predicted by several weather prediction centres. There is already evidence that the onset of the rainy season in Asia, of critical importance to predominantly rain-fed main crops, has got off to a difficult start."

Still, said FAO, and partly a reflection of the strong government assistance that the sector enjoys, the paddy season in Asia is expected to end with an overall positive result.

Across the various regions, Asia is predicted to reap 657 million tonnes in 2012, 0.4 p.c. above the outstanding 2011 performance.

Recovery

According to FAO, such a modest growth reflects expectations of a poor season in India, but also in Cambodia, the Chinese Province of Taiwan, the DPR Korea, the Rep. of Korea and Nepal, all of which may see production drop in 2012.

By contrast, China (Mainland), Indonesia and Thailand are anticipated to record sizeable gains, with smaller, but widespread, increases expected in the rest of the region.

FAO's 2012 production outlook for Africa points to a 773,000 tonne recovery in output to 26.0 million tonnes. Much of the forecast growth is expected to stem from gains in Western African countries, although overall prospects are also positive for Eastern Africa and Egypt. Based on the latest figures, these gains would be more than sufficient to compensate for declines in southern parts of the continent.

In Northern Africa, the 2011 production estimate for Egypt has been revisited, based on a slightly lower estimate of area under paddy. Production in the country is nonetheless estimated to have surpassed the 2010 low level by 10% to 5.7 million tonnes (3.9 million tonnes, milled basis). Over the 2012 season, producers are expected to continue expanding rice acreage, based on prospects of remunerative prices, but also of a potential review of existing restrictions on rice exports following the instalment of a new Government administration.

As a result, FAO forecast production by Egypt to amount to 5.9 million tonnes, up 4 p.c. year-on-year.

Liberia, and Togo are all set to gather larger crops, with particularly large increases anticipated in Mali, Nigeria, Senegal and Sierra Leone. In Eastern Africa, FAO said it has lowered its 2011 production estimate for Ethiopia, following the release of an official figure of 90,000 tonnes.

Rainfall

This would imply a 36 p.c. year-on-year as farmers reacted to more attractive prices of alternative crops.

In 2012, production is forecast to recover to 104,000 tonnes, still short of the 2010 high of 140,000 tonnes, mainly due to the delayed and erratic rainfall...

In Latin America and the Caribbean (LAC), a lack of precipitation and a shift towards more remunerative products in Brazil, Argentina, Paraguay and Uruguay are behind a 7 p.c. drop of production in the region in 2012. Yet, prospects remain positive for Bolivia, Colombia, Guyana, Peru and Venezuela.

At the country level, Bangladesh and Indonesia are now foreseen to import less than previously thought, while forecasts of purchases by China (Mainland) and the Islamic Republic of Iran were revised upwards. Among exporters, sales from Pakistan, Thailand and Viet Nam were lowered, while they were raised for Argentina, Brazil, India and the United States.

At the new forecast level, global rice trade would be about 1.0 million tonnes shorter than the 2011 high. Weak import demand in Far Eastern Asian markets is expected to drive this fall, more than offsetting projected increases of deliveries to Africa, Latin America and the Caribbean, Europe and North America.

The global stock-to-use ratio would be up to an estimated 34 p.c. in 2013. Much of the reserve building this season is expected to be concentrated among exporting countries, while reduced imports may result in smaller reserves held by traditionally importing countries. Looking ahead to the coming months, the UN agency said that international rice export prices are likely to be influenced by the progress of the paddy growing season in important northern hemisphere countries. "The pattern of the monsoon in Asia will be of particular importance, as it will determine how much exportable supplies are available in major supplying countries."

Government policies are also expected to play an important role, however, especially those concerning the release of stocks in India and Thailand, and restrictions on trade. In this respect, while the unrestricted flow of exports of non-basmati rice in India is likely to be contingent on the country's domestic supply and price situation, any fear of potential shortfalls arising from a slow and deficient progress of the monsoon needs to be viewed within the context of India's large size of rice reserves, including public ones, the FAO noted.

Decisions regarding the disposal of hefty government stockpiles in Thailand will also need to be monitored. "Prospects of large crops availabilities and ample world reserves have so far insulated rice markets from the turbulent price behaviour dominating the maize and wheat markets. Nonetheless, developments in other cereal markets may eventually trickle down to affect the rice economy.

Purchasing decisions by important importers will also hold sway over the market, as will currency movements," the FAO concluded.

- Third World Network Features