China's transformation from a net importer to a net exporter was one of the most significant developments in the 2019 global rice market, and this is expected to continue in 2020 due to China's large stocks and international demand for low-cost rice.
The strength of the dollar has been a particularly important factor in 2019 because of US President Donald Trump's trade policies and is expected to remain so ahead of the 2020 presidential election. The seasonal falls in South American prices are likely to be restricted by reduced production across the region as well as demand from regular buyers. Similarly in the US, participants are expecting limited supply in the first quarter due reduced long grain production, with harvesting not due until Q3.
ASIA
Chinese exports have taken market share from most major origins, with particularly high demand from buyers in Africa. It appears likely that the country's huge surplus of competitively priced old-crop stocks will continue entering destination markets at the expense of other origins in 2020. The US Department of Agriculture has forecast China's ending stocks in the 2019-20 marketing year (July-June) at 118 million mt (milled equivalent), up 2.41% year on year; China's ending stocks are expected to make up 66% of total global ending stocks.
The dollar has affected supply and demand in 2019. Its strength against the euro has reduced West and Central African buyers' purchasing power, as both the West and Central African franc are pegged to the euro. While most origin currencies have depreciated against the dollar, the Thai baht has appreciated. This has restricted Thai exporters' ability to keep their prices competitive and Thai exports have declined as a result. The USDA forecast 2019 exports at 8.6 million mt (milled equivalent) 22.3% lower on the year. While 2020 exports are expected to increase from this unusually low level to 9.7 million mt. However, exports are unlikely to reach 2018's 11.1 million mt due to the strength of the baht and competitive Chinese exports.
Exports from Thailand, and other Asian origins, have also been affected by the closure of Nigeria's land borders. This has particularly affected demand for parboiled rice from Thailand and India. Nigerian President Muhammadu Buhari has been quoted in local reports as saying that the borders will remain closed until at least January 31, 2020 due to unofficial cross-border rice trade, despite pressure from its neighbors to open them. While trade is expected to return to normal once the borders are re-opened, traders are likely to remain cautious in case they are closed again.
Despite lobbying from farmers' groups and conflicting statements from President Rodrigo Duterte, it does not seem likely that the Philippines' Rice Tariffication Law will be revoked. As a result, imports are expected to continue at the pace established at the end of Q2 2019.
AMERICAS
Harvesting of South American crops is due to begin in Q1 2020. Production in the major South American origins (Argentina, Brazil, Paraguay and Uruguay) are forecast to either remain close to last year's low levels or fall year on year as farmers switch to other crops due to high paddy production costs and increased Chinese demand for soybeans. While CONAB has forecast Brazilian planted area 1.1% lower year on year, higher field yields are expected to boost production 0.6% to 10.5 million mt. Exporters in Uruguay broadly agreed with the forecast of 2020 paddy production at 1.08 million mt, down 10% on the year, as presented at the Conmasur meeting. Although figures at this meeting also forecast Paraguayan production 2.94% lower at 1.09 million mt, Paraguayan rice is still expected to be extremely competitive. Regular demand from buyers in South and Central America, as well as the EU and Iraq, is expected to continue.
Reduced 2019 production is expected to support US prices in 2020. Signing of the USCMA agreement this month is likely to solidify Mexico and Canada as major US rice buyers. While exporters are hoping that further sales can be concluded to China after the first shipment was received successfully in 2019, it is unlikely to become a major importer of US rice next year. Further large volume sales to Iraq under the countries' Memorandum of Understanding are also likely to provide support to the market.
EUROPE
Harvesting in Italy was severely delayed by bad weather in 2019, and new-crop prices have not witnessed much of a seasonal fall as a result. Farmers have already sold 32.2% of new-crop paddy, according to Ente Nazionale Risi, and are in no rush to conclude sales due to adequate storage facilities. While the prices of risotto and long-grain varieties may fall in 2020 as production rose year on year, round-grain prices are expected to increase due to lower production.
