Ten reliable rice years
International grains traders rarely consider the historicity of what they deal with day in and day out. Wheat up today, maize down tomorrow, soy futures worth considering for next month, milk powder positions to be liquidated, and so on. Hold what you can profit from only so long as there is profit to be made, and futures are nothing but bets you’ve studied carefully.
But even for the hard-boiled traders, the last decade of rice has made them turn to look back and consider the curiosities of the market. Inventories of rice, all over the world, have been growing slowly and steadily for close to a decade. Now that trend, which since 2003 has been one of the longest unbroken trends in world agriculture, is ending. The change is being attributed, in the commodity exchanges and grain trading floors, to what is called a ‘downgrade’ of supplies of rice in India by the International Grains Council.
The first such forecast decline in world rice stocks, of about one million tons, means that the IGC is estimating world rice inventories at the close of 2013-14 to be 108 million tons. The curious aspect is that India is expecting a bumper rice harvest for 2013-14, and although IGC says world inventories will drop slightly (the end of the trend), there is also a reduced estimate for world consumption of rice, which is another curiosity.
According to the traders Thailand, the top rice exporter for years, has been stockpiling rice “at prices some 40%-50% above the market” and thereby prompting credit rating agencies like Moody’s to claim that the cost of the Thai programme was “threatening the country’s sovereign debt rating”.
This is plain rubbish. Traders and commodity exchanges do not grow rice to feed their families and sell if there is a small surplus to sell. The finance bots in predatory agencies like Standard and Poor’s, Moody’s and Fitch – considered the three largest by the scale of their work – don’t know the difference between a cauliflower and millet and can grow neither. Thai, Indian and African small farmers could not care less whether credit rating agencies exist and our governments should learn what true sovereignty means from our small farmers.
The odd tale of rice was given a late twist by two cyclones. One is Cyclone Phailin which struck the eastern Indian coast in the first week of October 2013. And he other is Typhoon Haiyan, which struck the Philippines in early November 2013. Vietnam is to supply 500,000 tons of rice to the Philippines, which has sought the supplies to boost state reserves depleted by the relief operations after Typhoon Haiyan.
The FAO’s Rice Market Monitor for 2013 November said: “Although accounting for much of the worsening in the global outlook, Asia is still expected to sustain growth in world rice production in 2013. According to the latest forecasts, the region is to harvest 672.7 million tonnes (448.6 million tonnes, milled), 1.2% more than in 2012. Foremost among countries responsible for the increase are India, Indonesia, Thailand, Myanmar and Bangladesh. By contrast, drought in China’s central and eastern provinces exacted a heavy toll on the intermediate and late rice crops, which may bring about the first production decline in the country since 2003.”
I find the FAO Rice Market Monitor more detailed than what the IGC puts out (although IGC’s public offerings are but a distillation of what subscribers to the information service obtain). The FAO Monitor has also added that given a poor delivery record so far, Thailand appears unlikely to boost its exports beyond the relatively low level of last year. And that expectations have improved for India, which may replicate the 2012 record performance, with Australia, Cambodia, China (Mainland), Egypt, Pakistan, Paraguay and the USA also forecast to export more.