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Rice supply outstrips demand despite lower 2012 production according to FAO

Tuesday, August 7th 2012 - 17:26 UTC
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Rice paddy production this year is estimated as 724.5 million tons Rice paddy production this year is estimated as 724.5 million tons

The United Nations’ food agency cut its 2012 global rice production forecast but said supply would still outstrip demand and that there was no increased risk of a food crisis as long as countries do not resort to export bans.

The Food and Agriculture Organisation (FAO) said it had cut its outlook for rice paddy production this year by 7.8 million tons to 724.5 million tons, due mainly to below-average monsoon rains in India. Mercosur countries will also see a decline in production because of less rain and shift to other crops.

That is still higher than levels reached in 2011, FAO said in its Rice Market Monitor. On a milled basis, it translates into 483.1 million tons, above an expected utilisation of 474 million tons in 2012/13. “The situation is still very comfortable on the rice side,” an FAO senior economist, Concepcion Calpe, said.

“Even in the case of India, where you have this bad monsoon, we still foresee a level of production which will be more than sufficient to meet the country’s needs and leave a surplus for exports.” In July, the FAO cited plentiful supplies of rice as one reason why world markets were not yet facing a food crisis like that of 2007/2008 despite soaring grain prices.

Calpe said on Monday there was unlikely to be a repeat of the 2007/08 situation as long as “countries do not start reacting crazily as they did in 2007, which means that India does not establish an export ban just because the monsoon is delayed”. A 22% lower-than-average monsoon rainfall in India through mid-July is likely to reduce output in the country this season, FAO said. Production forecasts have also been cut for countries including Cambodia, the two Koreas, Taiwan and Nepal.

However some countries are expected to register production gains including China, Indonesia and Thailand along with several other countries in Asia. Africa’s production may increase as much as 3% while Australia rice harvest was 32% higher this year.

Prospects are also good for several South American countries, Bolivia, Colombia, Guyana, Peru and Venezuela but poor precipitation and shifts towards more remunerative crops in Argentina, Brazil, Paraguay and Uruguay are behind with a 7% drop of production in Latin America and the Caribbean as a whole.

Asia accounts for the lion’s share of global rice production and FAO is predicting the region will reap 657 million tons on 2012, up 0.4% from the strong 2011 performance.

Global trade in 2012 is expected to decline by one million tons to 34.2 million largely as a result of reduced import from Asian countries. Thailand is expected to suffer a sharp decline in exports and Argentina with Brazil, China, Myanmar and Uruguay and Vietnam also shipping less rice.

Global rice inventories at the close of the 2012/13 marketing years were revised upwards by 200.000 tons to 164.5 million tons (milled basis). This would imply a 9 million tons increase from the previous year and mark the eighth consecutive season of stock accumulation. Thailand needs to release its abundant stocks before the October harvest which could impact prices.

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