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U.S. Rice
Competitiveness in the World Market
During 2002, notwithstanding the significant narrowing in the price difference between U.S. and major Asian competitors (primarily Thailand), the increase in U.S. market share in the global rice trade has been small.
World rice prices have trended down over the past four years. In mid-2000, while U.S. prices strengthened due to a decline in production, global import demand declined and Asian prices fell. Consequently, the spread grew (Chart 1, Point A) and U.S. competitiveness declined. As global import demand continued to contract in the final quarter of 2000 and Asian prices dropped to reach a 30-year low in early 2001 (Chart 1, Point B), the United States even lost business in the Western Hemisphere to competitive suppliers in Southeast Asia. For example, Thailand sold high-quality rice to Chile at lower prices than the United States, despite lower U.S. freight costs.
Over the past year, U.S. prices fell to the lowest levels since the 1960's. In contrast, Asian prices (excluding India) strengthened, primarily due to smaller supplies in Vietnam and increased intervention purchases by the Government of Thailand. This has caused the price spread to virtually disappear (Chart 1, Point C and Chart 3). In fact, there have recently been weeks when price quotes for Thai 100B were higher than quotes for U.S. #2/4. This new price relationship would appear to have positioned U.S. rice for an expanded market share in the higher-quality, regular milled white rice and parboiled markets.
However, the United States has not made significant inroads into any new markets or gained significant commercial ground in what have been traditionally Thai and Viet markets, even with the narrow price quote differential between the suppliers. For example, U.S. rice has failed to gain market share in major specialty rice markets (i.e., parboiled) such as Nigeria, Saudi Arabia, and South Africa, where Asian suppliers have a historical presence (Charts 4 and 5). Currently India is becoming a formidable presence in gaining parts of all rice markets, including these specialty rice markets, with a significant quantity of exportable supplies and undercutting prices. The United States, as a supplier of high-quality rice, is typically unable to compete in the huge low-quality rice markets in East and West Africa (Charts 6 and 7).
Other factors limiting growth in U.S. exports are:
(1) No sustainable growth in global import demand through 2001 as major importers typically harvested bumper crops;
(2) Several of the top high-quality importers-i.e., Iran and Iraq-are currently under sanctions imposed by the United States or, for political reasons, do not do business with U.S. suppliers;
(3) Farmer holding of stocks in anticipation of higher prices; and
(4) A freight disadvantage to many key rice importing countries, especially in Africa and the Middle East.
However, U.S. rice exports to several relatively small, nearby markets have increased in recent years and are forecast to remain strong in 2003. Some of the most notable increases have been in Central America - especially El Salvador, Guatemala, Honduras, and Nicaragua.
The increase in exports to these countries is in part due to stepped-up marketing efforts by the U.S. rice industry via trade servicing programs such as in-store promotions and mobile cooking demonstrations.
Local supply and demand conditions and food security concerns have also contributed to rising imports. In these Central American countries, rice production is flat-to-declining while consumption continues to increase every year. As such, imports will likely continue to expand over the next several years. Further, recent speculation of a possible El Nino phenomenon has encouraged some government disaster planning. In 2003, U.S. rice exports are expected to again be supported by steady U.S. sales to these markets.
For more information, contact Michelle Thomas at (202) 720-9523 or Michelle. Thomas@fas.usda.gov.
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