Another record Indian rice crop may add to world glut
Shipments will climb 5 per cent to 10.5 million tonnes in the year beginning April, according to estimates compiled by Bloomberg.
Output may jump to a record high of 110 million tonnes in the season beginning July, according to Vijay Setia, a former president of the All India Rice Exporters Association.
Surging exports from India may add to global food supplies as farmers from Vietnam to China are preparing to plant a record rice crop. Stockpiles in Thailand have surged to a record high as the government buys supplies from farmers, while exports from Myanmar and Cambodia have expanded.
The glut may further curb world food costs, which tumbled for five straight months to February.
"Prices may be depressed if Thailand starts putting a lot of supply in the market and India continues its exports," said Concepcion Calpe, the secretary of the United Nations' Food & Agriculture Organisation's inter-governmental rice group, who has tracked the market since 1998. "Vietnam has a lot of supplies and Myanmar is also trying to gain more markets."
Global production of rice, the staple for half the world, will climb 1.2 per cent to 472 million tonnes next year, while stockpiles in the five largest shippers are estimated at 38 million tonnes, equal to one year of imports, according to International Grains Council data.
World inventories are forecast at a record 171 million tonnes in 2012-13 as supply exceeds consumption for an eighth season, according to the FAO.
The monsoon, which accounts for more than 70 per cent of India's annual rainfall, will be normal in 2013 for the third time in four years and chances of a drought are only 4 per cent, according to Jatin Singh, chief executive of Skymet Weather Services, who correctly predicted a drought in 2009. That may boost rice planting.
"There is no reason why we cannot boost exports next year when the monsoon will be normal," Setia said. Shipments reached a record even after a drought cut output in 2012-13, he said.
Stockpiles in Thailand jumped after Prime Minister Yingluck Shinawatra started buying from farmers in 2011, fulfilling an election pledge to boost rural incomes. The country may run out of warehouse space as reserves jump 40 per cent to a record 18.2 million tonnes, according to the United Nations.
Prices in Vietnam, an Asian benchmark, will drop 6.6 per cent by December to $US377.50 a tonne, the lowest since 2010, based on the median of 10 trader estimates.
"If prices fall, the African countries and the Near East markets will benefit and it could even be that there will be increased flow of Asian rice into Latin America," Calpe said.
India is exporting rice mainly to Africa and Bangladesh at about $US395 a tonne, while premium basmati rice is sold at about $US990 a tonne to the Middle East, Iran and Europe, according to government data. Basmati exports account for about 25 per cent of total sales, the data showed.
India's exports will depend on monsoon and domestic requirement to run a food security bill, said Samarendu Mohanty, a senior economist at the Philippines-based International Rice Research Institute. Any decline in shipments from India will be met by increased sales from Thailand, which will nullify the impact on prices, he said.
The Indian government will need 61.2 million tonnes of grains to implement the bill, which seeks to guarantee five kilograms of grain a month a person.
Frequently Asked Questions about this Article…
India's rice exports are rising as the harvest is expected to rebound on a normal monsoon. Bloomberg estimates shipments will climb about 5% to 10.5 million tonnes in the year beginning April, and a former industry president forecasts output could reach a record 110 million tonnes in the season beginning July. For investors, stronger Indian exports mean more supply flowing into global markets.
A bumper Indian crop would add to surging production across Asia—farmers in Vietnam and China are planting record crops while Thailand, Myanmar and Cambodia have expanded supplies. The FAO forecasts world inventories at a record 171 million tonnes for 2012‑13. With supply outpacing consumption, prices are likely to face downward pressure, which already contributed to food costs tumbling for five straight months to February.
Trader estimates point to Vietnam benchmark prices falling about 6.6% by December to roughly US$377.50 per tonne. India is exporting non‑premium rice mainly to Africa and Bangladesh at about US$395 a tonne, while premium basmati sells near US$990 a tonne and accounts for about 25% of India's export value. These benchmarks help gauge price direction and margins across markets.
The monsoon provides more than 70% of India’s annual rainfall. Forecasters say the 2013 monsoon is likely to be normal—with a low 4% chance of drought—which would support increased planting and output. Industry sources say a normal monsoon could enable India to boost exports next year, so investors tracking agricultural supply should monitor seasonal rainfall forecasts closely.
Global production is forecast to rise about 1.2% to 472 million tonnes next year, and stockpiles in the five largest shippers are estimated at around 38 million tonnes—roughly one year of imports. High inventories and rising production mean supply could continue to outstrip demand, a setup that typically puts downward pressure on rice prices and related agricultural commodity plays.
Thailand's government stock‑buying program has pushed reserves to a record 18.2 million tonnes (up about 40%), potentially freeing more supply if sold. Vietnam is planting heavily and is the regional price benchmark; Myanmar and Cambodia have expanded exports. Together these exporters can quickly offset changes in Indian shipments, influencing global supply and price trends.
Yes. India would need about 61.2 million tonnes of grains to implement the proposed food security bill (which aims to guarantee five kilograms of grain per person per month). Economists note that Indian exports will depend on the monsoon and domestic requirements to run such programs—any cut in exports could simply be met by increased sales from other suppliers like Thailand.
Keep an eye on: monsoon and seasonal weather forecasts in India and Southeast Asia; official export and shipment estimates (for example, India’s projected 10.5 million tonnes); stockpile levels in major exporters such as Thailand; benchmark prices (Vietnam price and India export prices); and FAO or International Grains Council inventory and production updates. These factors together signal supply trends and likely price movements.
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