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Strong signs of record rice production

May 13, 2008 10:14 AM

Rice production in Asia, Africa and Latin America is forecast to reach a new record level in 2008, FAO said, warning that world rice prices could remain high in the short term, as much of the 2008 crops will only be harvested by the end of the year.

“World paddy production 2008 could grow by about 2.3 percent reaching a new record level of 666 million tons, according to our preliminary forecasts,” said FAO rice expert Concepcion Calpe.

Production growth could even be higher if recent appeals and incentives to grow more rice lead to a larger expansion of plantings, according to the Rice Market Monitor. “But the cyclone disaster in Myanmar could well worsen our forecast,” she added.

Myanmar

The destruction of Myanmar’s food basket may sharply decrease national rice production and impair access to food, according to first FAO estimates. The cyclone damage could worsen the current global rice production outlook. The cyclone struck when paddy farmers were harvesting their dry season crop accounting for 20 percent of annual production. Entire rice-growing areas are flooded and many roads and bridges are impassable. Several rice warehouses and stocks were destroyed. Rice prices in Rangoon have already surged by nearly 50 percent.

Myanmar may need to turn to neighboring countries, such as Thailand and Viet Nam for rice imports. This could lead to further pressure on world prices.

Major gains

“For the first time, paddy production in Asia may surpass the 600 million ton benchmark this year, amounting to 605 million tons,” Calpe said. “Major gains are expected all across the region. Bangladesh, China, the Philippines, Thailand and Viet Nam could register the largest gains. Prospects are also buoyant for Indonesia and Sri Lanka, despite some recent flood-incurred losses,” Calpe said.

Assuming normal rains in the coming months, rice production in Africa is forecast to grow by 3.6 percent to 23.2 million tons in 2008, with large expansions anticipated in Ivory Coast, Egypt, Ghana, Guinea, Mali and Nigeria. Paddy production in Latin America and the Caribbean is expected to rebound by 7.4 percent to 26.2 million tons in 2008. Production prospects, however, are negative for Australia, the United States and Europe.

Prices

Rice prices have skyrocketed by around 76 percent between December 2007 and April 2008, according to the FAO Rice Price Index. International rice prices are expected to remain at relatively high levels, as stocks held by exporters are expected to be reduced heavily. In addition, other large importers will probably return to the international market to buy rice, including the Islamic Republic of Iran, Saudi Arabia, Nigeria and Senegal. “Prices are expected to remain extremely firm, at least until the third quarter of 2008, unless restrictions on exports are eased in the coming months,” Calpe said.

In an attempt to avoid food scarcities in their own countries, major rice exporters have recently imposed export bans, taxes or minimum ceilings. “These measures further restricted the availability of rice supplies on international markets, triggering yet more price rises and tighter supply conditions. At the moment, only Thailand, Pakistan and the United States, among leading exporters, are exporting rice without any constraints,” Calpe added. Auctions by the Philippines to import massive volumes of rice have also contributed to record rice prices.

For prices to fall, favorable weather conditions must prevail in the coming months and governments relax rice export restrictions. Even then, rice prices are unlikely to return to the levels of 2007, as producers have to pay much more for their fertilizers, pesticides and fuel.

Export restrictions will influence trade in rice, estimated to reach 28.8 million tons in 2008, around 7 percent or 2.2 million tons lower than the 2007 record level.

Average world rice consumption per person is set to increase by 0.5 percent to 57.3 kilo per year, up from 57 kilo in 2007. Despite high rice prices, consumers seem to shift away from more expensive foods, in particular meat and meat products.

The sudden surge in world rice prices has shed some light on major medium term constraints that have been often ignored in the past two decades, such as low investment in agriculture, especially irrigation, reduced funding for agricultural research, environmental problems, stagnating productivity and migration from rural areas to the cities.

Food summit

Heads of state and government will meet in Rome (3-5 June 2008) to discuss the impact of soaring food prices and how to improve world food security.

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