For the 2018/19 marketing year, the U.S. rice market is experiencing its share of fundamental headwinds. From larger year-on-year production of all rice classes, long- and medium/short-grain, domestic supplies are more than accommodating. While the supply side of the rice story is a familiar tale within the U.S. agricultural commodity complex, the export side of the balance sheet is encouraging.
Based on declining Asian and Australian production, we expect the export program to increase and to help manage the carryout. Despite the encouraging export prospects for U.S. rice, the accommodating carryout and stocks-to-use ratio can limit price appreciation.
Growing Domestic Production on Larger Acres and Yields
During the current marketing year, aggregate planted U.S. rice acres expanded by 0.5 MA to 2.9 MA, which from an absolute prospective is not that large but the +19% YoY expansion in percentage terms is near the top end of the 20-year range. Favorable weather helped propel national yields to 7,522 lbs, which was the second largest yield since 2000.
Aggregate domestic production at 218.3 million CWT is +40 million CWT, +23% YoY, and the largest YoY production increase in 20 years. Long-grain rice production at 158.6 million CWT is +31 million CWT YoY and the third largest year-on-year increase since 2000. Medium- and short-grain rice production, at 59.6 MCWT, rose by 9.5 million CWT.
Puerto Rico Driving Record Imports
Currently, the USDA has aggregate rice imports at 28.5 million CWT, +6% YoY, which is a record year. However, the number is slightly deceiving as medium- and short-grain imports at 5 million CWT are 41% higher than 2017 with Puerto Rico accounting for nearly all of the volume. The Puerto Rico imports are from China, as importing Chinese rice is more economical than shipping directly from the mainland U.S. U.S. long-grain 2018/19 imports remain projected at a record 23.5 million CWT, up less than 1% YoY, with aromatic varieties from Asia accounting for the bulk of the shipments.
Thailand, the largest supplier of rice to the United States, accounts for most of the slower pace of U.S. long-grain imports in 2018/19. Imports from India and Pakistan, also suppliers of aromatic rice, are about even with last year.
U.S. Rice Exports Gaining Momentum
The 2018/19 total U.S. rice exports at 99.0 million CWT, +14% YoY, with much of the volume coming from the medium- and small-grains. Long-grain exports remain projected at 67 million CWT, +6% YoY. The expected increase in exports is based on larger U.S. supplies and more competitive prices. In December, the USDA raised the all-rice export number primarily on a weaker Australian export program as severe drought sharply reduced plantings. Australia is a major supplier of medium- and short-grain rice to Northeast Asia, the Middle East, North Africa, and Oceania.
The U.S. is expected to assume some of the volume as California typically supplies all U.S. rice exports to Northeast Asia. U.S. long-grain exports are expected to regain some lost market share in Latin America, where it has lost sales in recent years to several lower-priced South American origins. While China, both the world’s largest producer and importer of rice, has agreed to import 5MMT of U.S. rice, as a goodwill gesture during the U.S./China trade talks, the price differential between U.S. and Thailand and Vietnam will present competition.
Despite the encouraging prospects of the U.S. export program, the all-rice carryout is projected at 44.2 million CWT, +50% YoY. The 2018/19 stocks-to-use are projected at 19% and well above the 13.3% in the 2017/18 marketing year.
Long-grain 2018/19 ending stocks are projected at 32.4 million CWT, +60% YoY. For medium- and short-grain rice, 2018/19 ending stocks are projected at 10.3 million CWT, down 2.5 million CWT from the previous forecast but +36% YoY. Driven by strong YoY production increases of all domestic rice varieties, we believe that the by-class rice carryouts can prohibit price appreciation.
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