rt vol. 9, no. 2 hidden treasure
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7/31/2019 RT Vol. 9, No. 2 Hidden treasure
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5Rice TodayApril-June 2010
Hidden Treasure*
The Chinese New Year has just been celebrated across most
o Asia as I write this issues Hidden Treasure. For many in
the industry, this signals a well-deserved restwhich
we are sure is well appreciated. Unortunately, or those o us
here on the other side o the ocean, it is a time o activity, as the
year ahead is evaluated, as the pieces o the supply puzzle all
into place, and as plantings and uture supply across the Western
Hemisphere are assessed against demand in the Americas, to
build a model or what is letin terms o rice exportsto the rest
o the world.
Volatility has increased over the years as the weather
becomes more unpredictable. This is a serious concern, as most
countries and businesses have grown so used to some very
avorable actors that have resulted in strong production or
the past several years. Agrochemicals and new technology (in
arming and postharvest) also helped deliver the required output
to meet the growing populations needs. Yet, the variability in the
weather cannot be ignored as it aects the level o stocks held bycountries around the world. Several countries are orced to make
decisions with the immediate circumstances in mind rather than
plan or longer-term needs. This lack in oresight is a critical part
o the business today that must be watched or its impact on the
psychology behind decisions in the uture.
Notably, Vietnams massive winter-spring crop this year has
depressed the regions market. We cant help but eel that at least
part o this current weakness can be attributed to the act that
world rice markets have evolved since the crisis year o 2008to
take on this same near-term ocused decision-making process that
has ignored some very obvious long-term concerns that plague
production.
The government o Thailand has similar issuesalthoughthe Thai rice industry is more sophisticated in terms o overall
experience in exports and in the ambition to be a dependable
supplier to the worldconsidering the 5 million metric tons or
more o buer supplies it currently has. The problem, however,
is that this huge amount o stocks is becoming a real challenge
to the government because, i it is sold at current market prices,
Thailand will incur massive losses and deal with dire political
ramifcations. This will continue to be a major issue and a problem
or most rice-producing (and exporting) nations, which grapple
with ood security, national issues, and the business impact o
policy decisions.
Moreover, India continues to remain a critical variable in the
year ahead. A lot o PR rom the Indian government has beenindicating that the country has high stocks o wheat and that it
intends to use these to fll in the gap in consumption caused by
the shortall in rice production. Timing will be the key element
here as the summer crop plantings and the monsoon ahead soon
come into ocus. While the possibility o the government reducing
its stocks to minimize storage expenses is viable, these stocks
remain the countrys only insurance against the risk o another
bad monsoon.
Oddly enough, a healthy amount o demand is available, but,
with new crops coming in and augmenting supplies at several
major rice origins, this
actor has largely been
overlooked by the
market. The U.S. market
orecasts increased
production or 2010-
11. But, as I travel
right now in Arkansas,
Missouri, and Texas, I am reminded that the weather once again
needs to be monitored closely as the new planting season
approaches. The question now is whether or not the expected
demand will outweigh this concern. Adverse weather over the
past 6 months has already caused a 1015% reduction in supplies.
Furthermore, Brazil continues to headline weather-related yield
losses. Uruguay and Argentina have also been aected. Many eel
that the decreased export volumes rom these two countries will
be combined to meet local demand (especially rom Brazil), and
stocks rom the U.S. and Asia will likely be required to fll in thegaps. Markets are constantly in motion and, at present, I eel that
the market has not yet ully integrated these substantial losses
into the equation. Especially with a more short-term decision
process, many o the longer-term prospects will likely be actored
in only when they become a reality. Skepticism continues to
abound as the massive Vietnamese (and Thai) crops arrive.
Contrary to what is happening in Asia, the medium-grain
markets have seen U.S. exports already ahead by 25% compared
to last year. This shows the level o demand that this market
is receiving and also the shits in demand that global markets
continue to digest. Without an Australian availability, no resh
supplies are expected until October, as there is a undamental
shit in the way demand reveals itsel to leave its mark on the pricemechanism. Turkeys recent purchase o 200 thousand metric tons
during the frst quarter is just one example o how demand arrives
and how switly markets react on the realization o the news.
The dollar situation and currency market moves are also
crucial elements to watch: the Asian currencies, the euro, and the
dollar that remains weighed down by the pressure o the U.S. debt
and Chinas rise in the global village.
As we continue to watch the people who make the market
and gain some understanding about the uture, we would like to
invite everyone to The Rice Trader Americas Conerence 2010 in
Cartagena, Colombia, on 20-22 April 2010. An excellent panel o
speakers will provide insights into rice industry developments and
the road ahead. We have also arranged several social gatherings(including our great boat event). We hope to oer an excellent
opportunity or all to network and build the intelligence needed
or uture business decisions.
Jeremy Zwinger
Publisher
* The opinions expressed here are those o the author and do not necessarily refect the views o the International Rice Research Institute.