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.