The Hindu Business Line : FAO sees record rice output, lower trade

ALTHOUGH the price strength gained by the world rice market since December last was somewhat tempered in May on release of government-held stocks by Thailand and China, the prospects for prices in the next few months are still positive as import demand should remain strong. This is subject to availabilities at least until August/September when a number of northern hemisphere producers would have harvested their main crop, the Food and Agriculture Organisation (FAO) has said.

"In this respect, information regarding the state of crop development in major producing countries will be felt critically by the market in the coming months, given the low level of stocks estimated to be available," the UN agency said in its latest rice market report.

On the production side, a record harvest of 613 million tonnes (mt) of paddy has been forecast for 2004, a 21 mt increase from last year, reflecting higher prices and increased government support. However, the forecast is highly tentative since the season final outcome will be largely influenced by the timing, extent and distribution of rainfall during the Asian monsoon, just beginning, the report cautioned.

Interestingly, increased output is foreseen in major importing countries such as Bangladesh, Iran, Nigeria and the Philippines. As a result, the world import trade would be 25.7 mt, down 2.3 mt from 2003 because of decline in the import of rice by many countries.

In China, the expected increase in import is likely to be smaller than earlier anticipated since the government has given clear signal that the country still has enough reserves to keep its imports within reasonable limits.

On the export front, while Thailand is expected to increase its shipment, and to a lesser extent by Vietnam, much smaller volumes are likely to be shipped out by India as export subsidies are still suspended, the report pointed out, adding that planting of main kharif crop has already started in the South since the monsoon due by end-May reached the country two weeks early.

Assuming normal rainfall distribution in the coming months, India's production of paddy in 2004 could reach 136 mt, up 3 per cent from last year, FAO said, adding that on the policy front, the recently-elected Government announced it would launch crucial reforms in its agricultural sector with the pledge to improve farmer incomes and to liberalise marketing of agricultural products.

India's rice sales in 2004 are anticipated at 2.5 mt, down from 4.5 mt in 2003 based on expectation that export restrictions imposed to help rebuild reserves will be revoked in the second half of the year, the report noted.

India's export volumes would also depend on whether export subsidies such as sale through Food Corporation of India (FCI) at lower-than-market price and grant of payment (subsidy) towards local transport and ocean freight. The Government had recently decided to allow exporters to directly purchase from the market rather from FCI.