World Rice Situation: Supply, Demand and Prices

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World Rice Situation Supply, Demand and Prices

• Samarendu Mohanty
• Head and Senior Economist
• International Rice Research Institute
• s.mohanty_at_cgiar.org

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My Presentation

• Aftermath of the Global Rice Crisis
• Near-Term Market Outlook
• Future Global Rice Food Security
• How much is needed?
• What needs to be done to achieve it?
• Uncertainties that can Derail the outlook

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Rise and Fall of Rice Prices
Data Source World Bank and USDA
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What Exactly Happened?

• Convergence of long- and short-Term factors
• Long Run
• Slowdown in yield growth
• Strong demand growth
• Extreme weather and pest and disease problems
• Short Run
• Trade restrictions
• Biofuel
• Commodity speculation

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How Countries Have Responded?

• Rush to increase domestic production
• Fertilizer subsidy, raising MSP /procurement
  prices, seed subsidy, etc.
• Trade restrictions to keep domestic supply at
  home
• Rebuilding national stock level
• Renewed focus on making regional rice reserve
  operational

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Outcome so far..

• 40 increase in MSP continued export ban in
  India Nearly 25 million tons of procurement
  stocks
• Thai rice mortgage scheme nearly 6 million tons
  in government storage
• Rise in government to government purchases
• Prices remain higher than what it should have
  been in a free market.

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Rice Retail Prices India vs Philippines
Rupees, pesos/kg
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Rice Market 2008 vs 2009

• Fundamentally, market is not much different from
  last year
• Little more buffer stock but supply to the global
  market is still tight
• Credit problem affecting the volume of trade
• Major difference is the market sentiment
• Last year exporters were shying away from the
  market and buyer were rushing in
• This year market is hopeful that some exporters
  will enter the market in the near future

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Near-term Market Outlook

• Will be influenced by a series of events
• Indian decision whether to remove export ban on
  non-basmati rice
• Some relaxation on non-basmati rice last week
• Thai decision whether to offload some of the
  intervention stocks
• Ongoing credit crisis Likely to affect supply,
  demand and trade

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Indian Drought Situation

• Southwest monsoon has finally shown some signs of
  revival
• July 10 Rice shown area is around 7.5 million
  hectares as compared to 3.8 million hectares last
  week,
• Still accounts for only 19 of the normal area
• source The Financial Express

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Indian Drought Situation

• Rainfall Deficit in most northern and central
  states
• Madhya Pradesh 90
• Punjab 71
• Haryana 51
• Rajasthan 57
• Bihar 52
• Uttar Pradesh 80

Source Times of India and CNN-IBN
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LONGER TERM PERSPECTIVE
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Prices Have Been Rising Since 2001
Source of raw data The Pinksheet, World Bank
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Rice Price Dollar vs Gold
Rice Price in Dollar
Rice Price in Gold
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World Rice Stocks
Million Tons
Data Source USDA
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Global Rice Usage Per Capita vs Total
Kgs/person
000 Tons
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Monthly Urban Rice Consumption by Income Group
Kilograms
Q1 Poorest 20 of the population and Q5 richest
20 of the population
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Monthly Rural Rice Consumption by Income Groups
Kilograms
Q1 Poorest 20 of the population and Q5 richest
20 of the population
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Per Capita Rice Consumption
Kilograms
4.3
3.5
0.75
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Total milled rice consumption
000 MT
59 mmt
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Slowdown in Global Paddy Yield Growth
Tons/Ha
USDA, Sep 2008
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Source of Rice Production Growth in 21st Century
(Milled)
Data Source Production, Supply and Distribution
Database, USDA
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Global rice supply outlook

• Less than 1 yield growth
• Declining rice area usual competitors biofuel
  feedstocks
• Fertilizer and water constraints
• Range of outcomes
• Negative to very low production growth

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Required Yield Growth
1.2-1.5/yr
Rice and wheat yield growth in South Asia
Target range
1/yr
Do nothing
lt1/yr
1/yr
Recent yield growth in R, W
2010
2015
2020
Source A. Dobermann
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Increase Productivity in Unfavorable Area

• Development of Stress Tolerant Varieties
• Flood
• Drought
• Heat
• Saline

20 million ha affected in South and Southeast Asia
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Submergence Tolerance Varieties India 2008
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Swarna-Sub1 in India (2007-08)
Yield performance (32 sites, 2007) No flood
equal yield Short flood (6-10 d) 25
advantage Med flood (10-15 d) 50
advantage Long flood (gt 15 d) 150 advantage
July 31
Oct 31
Eastern Uttar Pradesh
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Things that can alter these projections

• Financial Crisis
• Climate Change

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Indonesia Rice Yield
MT/ha
Post Financial Crisis
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(No Transcript)
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Investment in Agriculture Continues to Fall
Despite High Return

• Return to investment on agricultural research and
  extension
• 35 for Sub-Saharan Africa
• 50 for Asia
• Return on irrigation projects
• 15-20

Source 2008 World Development Report
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What Else Needs to be Done?

• Some form of market integration is essential for
  future rice food security
• More realistic solution Market integration at
  some regional scale.
• Regional futures market in a public-private
  partnership.
• Participating countries will have to honor
  outstanding contracts held by its own traders.

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Concluding Remarks

• A number of short-term uncertainties (financial
  crisis, drought, trade restrictions) will keep
  the market on the edge.
• Longer term challenges
• Definitely needs to revamp yield growth.
• Refocus on agricultural research and
  infrastructure development.
• Greater integration of the global rice market
• At the regional level

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Thank You