Since this year, it has climbed for the fifth consecutive month——
How to deal with the rising international rice price
The latest food price index released by the food and Agriculture Organization of the United Nations (FAO) shows that the international rice price has risen for the fifth consecutive month this year, reaching a 12-month high. As a kind of ration, the price of rice has risen continuously, which has aroused widespread concern in the market. Why is the international rice price rising continuously? How big is the impact on the grain market?
Why prices keep rising
Data show that even though the international rice price has risen for five consecutive months, its price is still 6.0% lower than that of the same period last year. The international rice price fell continuously from March last year to the end of last year, with the price once falling by 27.5%. The current rise in rice prices is a rebound from the continuous decline last year. In fact, as major rice exporters, India and Vietnam have little fluctuation in rice export prices.
Dialectically, the rise in international rice prices is part of global inflation. Since the beginning of this year, many countries have experienced inflation, and the consumer price index (CPI) has reached a new high.
For example, Thailand is the center of international rice price formation. Recently, there has been great inflation pressure in Thailand. According to the data of the Bank of Thailand, the CPI of Thailand rose 7.1% year-on-year in May. Food prices are the basis of all prices. As an important agricultural product, the price of rice tends to rise before other commodities in the "basket" of the consumer price index, and it also rises by a larger margin than other commodities. Since the beginning of this year, the price of rice in Thailand's domestic market has increased by about 25%. At present, the price of rice in Thailand's domestic market has been higher than the export price.
The rise in international rice prices is also driven by the price transmission of wheat and other related varieties. In the current international situation, the international wheat price is easy to rise but difficult to fall, and the horizontal transmission effect will continue, triggering the linkage rise of international rice prices. It is estimated that under the condition that other factors remain unchanged, every 1% increase in wheat prices will drive rice prices up by about 0.2%.
The rise in international rice prices has its market basis driven by production costs and demand.
From the production side, the main rice producing countries are generally fertilizer importers, which bear the pressure of agricultural materials costs. The conflict between Russia and Ukraine has hindered the export of major fertilizer producing countries such as Russia and Belarus, further promoted the price rise of agricultural materials such as fertilizer, and increased the production cost of rice.
From the demand side, the market demand from the Middle East is increasing. Since the beginning of this year, Thailand has exported more than 200000 tons of rice to Iraq and is expected to export another 200000 tons; Due to the rising prices of wheat and corn, some countries use rice for feed production. The food and Agriculture Organization of the United Nations has predicted that the global use of rice animal feed in 2021/2022 is expected to reach 22.3 million tons, an increase of 11.9% year-on-year.
Will it continue to rise in the future
Under the current background, will the international rice price continue to rise in the future? What impact will it have on the grain market?
In the future, international rice prices will be mainly affected by the policies of exporting countries. Recently, major rice exporting countries in Southeast Asia planned to jointly raise prices. At the end of May, a Thai government spokesman said that Thailand and Vietnam planned to jointly raise rice prices. However, no clear policy information has been released yet. In recent three years, Thailand and Vietnam account for about 9.5% of global rice production and 32.8% of global exports. This time, Thailand and Vietnam planned to jointly raise prices, similar to the re mention of "rice export OPEC" in 2008, but it could not be implemented at that time due to the inconsistent interests of major exporting countries and other factors.
In addition, India announced a ban on wheat export in May, and the market has been highly concerned about the possibility of India restricting rice export. India's rice output accounts for 23.5% of the global output, the export volume accounts for about 26.2% and the inventory accounts for about 18.1%. The export price is the lowest, and the export volume continues to grow, which has a great impact on the international food price. According to the prediction of the food and Agriculture Organization of the United Nations, India's rice inventory in 2021/2022 is about 39million tons. In addition, according to the official in charge of food affairs of the Indian government, the government inventory level of processed rice and rice in the country has reached 57.82 million tons, about four times the target reserve of 13.54 million tons, so there is no plan to ban rice export for the time being.
The rice market is relatively independent from other grain markets. Rice is mainly consumed as rations, and the processing chain is relatively short; At the same time, affected by dietary habits, the overall demand for rice ration has little change; In addition, due to the constraints of nutritional indicators and energy value, rice generally does not have the potential to be used in a large number of feeds. According to the situation in 2021, the global rice output is 521million tons, and the trade volume is 51.5 million tons, accounting for about 9.9% of the output. In the same period, the trade volume of wheat exceeded 192million tons, accounting for 24.7% of the output, and the trade volume of corn was close to 181million tons, accounting for 15% of the output. The trade volume of rice is not large either in terms of trade volume or in terms of its proportion in production. Asian countries are the main producers and consumers of rice. Asian countries can basically maintain self-sufficiency in rice and import less. Take the Philippines, which has a large import volume, for example. In 2021, the country's import volume reached 3million tons, and its external dependence was only 18.8%. Therefore, rice importing countries generally have a certain tolerance for international rice price fluctuations.
The international market has the production and inventory base to resist the sharp rise in rice prices, as well as the corresponding exchange rate environment. At present, the global rice inventory remains high and the domestic production of main products is expected to increase. According to the latest prediction of FAO, the global rice output in 2021/2022 will be 520million tons. Although the output will decrease by 0.2% compared with the previous year, the ending inventory will remain at a high level of 192million tons, and the inventory consumption ratio will reach 36.4%. According to the forecasts of major international institutions, the domestic production of main products in Southeast Asia and South Asia is expected to increase. It is expected that the output of India will reach a record 130million tons, and the output of Pakistan, Thailand, Myanmar and other places is expected to generally increase. In addition, since 2021, the Thai baht has continued to depreciate, with a cumulative depreciation of 12.1% by May. Therefore, the international rice price priced in US dollars is still under downward pressure.
How to deal with the domestic market
The rise in international rice prices has little impact on the domestic market. Although China is the world's first rice importer, it imported only 4.96 million tons in 2021, accounting for only about 3.4% of the total output. Moreover, the concentration of rice import sources in China is not high. According to customs statistics, from January to April 2022, China imported 2.26 million tons of rice. The main sources of imports were India (30.9% of the total imports), Pakistan (26.6%), Thailand (13.5%), Myanmar (12.2%) and Vietnam (10.2%). Therefore, even if the rice price in Thailand continues to rise, China's rice importers can also turn more to import from India, Pakistan and other countries.
From the production side, the stability of China's rice market has sufficient material basis and policy guarantee. Since 2011, the output of rice has been maintained at more than 400billion Jin. In recent years, it has achieved a bumper harvest. In 2021, the output reached 425.7 billion jin. The state continues to implement land conservation subsidies for cultivated land and subsidies for the purchase and application of agricultural machinery. Recently, the central government has also granted a one-time subsidy of 20billion yuan to farmers who actually grow grain, easing the cost pressure caused by the rise in the prices of agricultural materials. In order to ensure farmers' income from growing grain, the minimum purchase price of rice will be raised in 2022. The minimum purchase price of early indica rice, medium and late indica rice and Japonica Rice will be 124 yuan, 129 yuan and 131 yuan per 50kg respectively, an increase of 2 yuan, 1 yuan and 1 yuan respectively over the previous year. The state has also launched green, high-quality and efficient actions for key crops, integrated and popularized new technologies, new varieties and new machines and tools, and created a batch of grain demonstration bases for high-quality edible rice and special processing early rice. At the same time, the state has adopted a series of policies to strengthen, benefit and enrich farmers, which has ensured the enthusiasm of grain farmers; In addition to the grain import and export control mechanism, policies such as minimum grain purchase price and policy grain competitive trading have also been implemented. The above-mentioned measures regulate throughput and complement each other, providing an environment for the stability of the rice market and laying a solid foundation.
(Pengchao, the author is the director of the Rural Revitalization research center of the Management Cadre College of the Ministry of agriculture and rural areas)