FAO: Rice Production Up by 1.8% in 2008, but Market Remains Tight

Recent sudden price rises reflect the very limited supplies available for sale, especially given the wide range of restrictions imposed by key major exporting countries WORLD rice production is expected to increase in 2008 by 12 million tonnes or 1.8%, assuming normal weather conditions, the UN Food and Agriculture Organization (FAO) said in April. Production increases would ease the current very tight supply situation in key rice producing countries, according to the first FAO forecast for this year. International rice trade is expected to decrease, mainly due to restrictions in main exporting countries. Sizable production increases are expected in all the major Asian rice producing countries, especially Bangladesh, China, India, Indonesia, Myanmar, the Philippines and Thailand, where supply and demand are currently rather stretched. Governments in these countries have already announced a series of incentives to raise production. Production outlook is also positive in Africa, where high world prices may sustain a 2% growth, particularly in Egypt, Guinea, Nigeria and Sierra Leone. Concerns about food import dependency in the region have led to a mobilization of resources towards the rice sector. Production is expected to recover strongly in Latin America. Rice production in the European Union is also expected to rise while it may contract in Japan, one of the few countries where producer prices fell last year. In the rest of the world, a dismal production is forecast in Australia, reflecting extremely low water availability. A reduced crop is also expected in the United States, mainly as a result of a cut in area caused by mounting competition from more profitable crops. Short-Term Volatility "The international rice market is currently facing a particularly difficult situation with demand outstripping supply and substantial price increases," said FAO senior economist Concepcion Calpe. "Higher rice production in 2008 could reduce the pressure, but short-term volatility will probably continue, given the very limited supplies available from stocks. This implies that the market may react very strongly to any good or bad news about crops or policies," she added. Rice is a staple for more than 2.7 billion people According to the latest FAO estimates, paddy production rose by one percent in 2007 to 650 million tonnes, which implies that it would be the second consecutive year where production growth would fall short of population growth, resulting in a drop of rice production on a per caput basis. Trade Situation is Tight International trade in rice in 2008 is currently foreseen to reach 29.9 million tonnes, 1.1 million tonnes lower than the revised 2007 trade estimate. The very tight supply situations that most exporting countries may face until the last quarter of the year and the associated restrictions on exports lay much behind the anticipated drop of rice trade in 2008. Currently, China, India, Egypt, Viet Nam, four among the traditional rice exporting countries, as well as Cambodia, have either imposed minimum export prices, export taxes or export quotas/bans. Such moves are expected to reduce rice exported from these countries. As for imports, the drop reflects prospects of lower shipments to Bangladesh, Indonesia and the Islamic Republic of Iran, as supply and demand situation in those countries may ease somewhat compared with last year. Steep Prices By the end of March prices of wheat and rice were about double their levels of a year earlier, while those of maize were more than one-third higher, according to the UN agency's latest

Crop Prospects and Food Situation

report. International cereal prices have continued to rise sharply over the past two months, reflecting steady demand and depleted world reserves, the report said. Prices of rice increased the most following the imposition of new export restrictions bLebron James Shoes