FAO forecasts high rice production in 2008

World rice production is expected to increase in 2008 by 12 million tonnes or 1.8 percent, assuming normal weather conditions, FAO said today.
Production increases would ease the current very tight supply situation in key rice producing countries, according to the first FAO forecast for this year. International rice trade is expected to decrease, mainly due to restrictions in main exporting countries.

Sizable production increases are expected in all the major Asian rice producing countries, especially Bangladesh, China, India, Indonesia, Myanmar, the Philippines and Thailand, where supply and demand are currently rather stretched. Governments in these countries have already announced a series of incentives to raise production.

Production outlook is also positive in Africa, where high world prices may sustain a two percent growth, particularly in Egypt, Guinea, Nigeria and Sierra Leone.

Production is expected to recover strongly in Latin America. Rice production in the European Union is also expected to rise while it may contract in Japan, one of the few countries where producer prices fell last year.

In the rest of the world, a dismal production is forecast in Australia, reflecting extremely low water availability. A reduced crop is also expected in the United States, mainly as a result of a cut in area caused by mounting competition from more profitable crops.

Short-term volatility

“The international rice market is currently facing a particularly difficult situation with demand outstripping supply and substantial price increases,” said FAO Senior Economist Concepcion Calpe.

“Higher rice production in 2008 could reduce the pressure, but short-term volatility will probably continue, given the very limited supplies available from stocks. This implies that the market may react very strongly to any good or bad news about crops or policies,” she added.

According to the latest FAO estimates, paddy production rose by one percent in 2007 to 650 million tonnes, which implies that it would be the second consecutive year where production growth would fall short of population growth, resulting in a drop of rice production on a per caput basis.

Trade moves

International trade in rice in 2008 is currently foreseen to reach 29.9 million tonnes, 1.1 million tonnes lower than the revised 2007 trade estimate.

The very tight supply situations that most exporting countries may face until the last quarter of the year and the associated restrictions on exports lay much behind the anticipated drop of rice trade in 2008.

Currently, China, India, Egypt, Vietnam, four among the traditional rice exporting countries, as well as Cambodia, have either imposed minimum export prices, export taxes or export quotas/bans. Such moves are expected to reduce rice exported from these countries.

As for imports, the drop reflects prospects of lower shipments to Bangladesh, Indonesia and the Islamic Republic of Iran, as supply and demand situation in those countries may ease somewhat compared with last year.

Prices

Since January 2008 international rice prices have seen a steep increase of about 20 percent, according to the FAO All Rice Price Index.

Recent sudden price rises reflect the very limited supplies available for sale, especially given the wide range of restrictions imposed by key major exporting countries.

The tendency for further price rises, however, may diminish somewhat in the next few months, with the arrival of new rice harvests in Brazil or Uruguay but also in Bangladesh, India, Indonesia, Thailand and Viet Nam. “So far, prospects regarding these crops are positive,” Calpe said.