Apr 08, 2020
WASHINGTON, DC -- The rice trade is no stranger to drama during any given year when you look at the impacts of extreme weather, geopolitics, or price fluctuation, however 2020 is proving to be uniquely dramatic. Between January and March, the U.S. Department of Agriculture (USDA) shifted world rice export estimates downward by nearly 3 million metric tons, a measurement coincidentally equivalent to total U.S. rice exports and likely to continue to drop as the coronavirus makes its way throughout the world. These effects, largely linked to COVID-19, are further exacerbated by droughts in Australia and Thailand, and an upward creeping world market price.
With growing world populations and record production in some major exporting countries such as India, 2020 was on track to see record high rice exports. USDA projected an increase in U.S. rice exports for 2020, and January and February trade data already shows a 67,000 MT boost from 2019 shipment levels. As countries absorb the shock of the coronavirus spread from week to week, there have been varying reactions by governments as they take decisive steps to preserve their food supply. These moves are made following panic-buying as people stock up on staples like rice and other foods, causing some to fear food shortage.
One such move was by Viet Nam, the world’s third largest rice exporter who halted new rice export certifications and is now looking to impose an export quota, severely limiting shipments for April and May. Viet Nam is still in the early stages of dealing with the coronavirus with several hundred confirmed cases and no deaths to date. The first and second largest exporters, India and Thailand, have not yet imposed restrictions, however the virus spread has not yet impacted them to the degree it has in the U.S., China, or Europe.
“Rice traders around the globe are noticing what’s happening in Viet Nam, and now others, like Cambodia and Myanmar, have imposed temporary bans or export limiting measures,” said Michael Rue, chair of the USA Rice Asia Trade Policy Subcommittee. “Those restrictions and heavy domestic sales due to folks buying up shelf-stable food like rice are going to have an impact on the world balance sheet this year as well as drive up global prices.”
Rue added: “We have seen a lot of interesting things happen with rice trade over the years and I think a paralyzing pandemic like this is going to have long-term effects on world rice policy. I wouldn’t be surprised to see more protectionist or trade distorting policies put in place by our competitors to ensure they have a sufficient supply of staples, like rice, if something like this happens again in the future.”
In addition to reduced world exports, Thailand’s long grain rice prices, often used as a world benchmark price, have jumped more than 25 percent since December to seven-year highs and continue to move upward. Accordingly, U.S. rough rice futures are moving upward and breaking a years-long low streak as well. High domestic prices bundled with a strong U.S. dollar means U.S.-grown rice exports are put at a competitive disadvantage in the short term, especially in markets like Mexico. While U.S. rough rice shipments continue to see strong demand in Mexico, origins like India and Viet Nam have been undercutting U.S. milled rice in the marketplace the last several months.
USA Rice will continue monitoring both the domestic and international rice supply situation as COVID-19 continues to spread, and will keep updated regulations on our USA Rice COVID-19 Resources webpage.