World rice production is expected to increase in 2008 by 12 million
tonnes or 1.8 percent, assuming normal weather conditions, according FAO.
Production increases would ease the current very tight supply situation in
key rice producing countries, according to the first FAO forecast for this
year. International rice trade is expected to decrease, mainly due to
restrictions in main exporting countries.
Sizable production increases are expected in all the major Asian rice
producing countries, especially Bangladesh, China, India, Indonesia,
Myanmar, the Philippines and Thailand, where supply and demand are currently
rather stretched. Governments in these countries have already announced a
series of incentives to raise production.

Production outlook is also positive in Africa, where high world prices
may sustain a two percent growth, particularly in Egypt, Guinea, Nigeria and
Sierra Leone. Concerns about food import dependency in the region have led
to a mobilization of resources towards the rice sector. Production is
expected to recover strongly in Latin America. Rice production in the
European Union is also expected to rise while it may contract in Japan, one
of the few countries where producer prices fell last year.

In the rest of the world, a dismal production is forecast in
Australia, reflecting extremely low water availability. A reduced crop is
also expected in the United States, mainly as a result of a cut in area
caused by mounting competition from more profitable crops.

Short-term volatility
?The international rice market is currently facing a particularly
difficult situation with demand outstripping supply and substantial price
increases,? said FAO Senior Economist Concepcion Calpe. ?Higher rice
production in 2008 could reduce the pressure, but short-term volatility will
probably continue, given the very limited supplies available from stocks.
This implies that the market may react very strongly to any good or bad news
about crops or policies,? she added.

According to the latest FAO estimates, paddy production rose by one
percent in 2007 to 650 million tonnes, which implies that it would be the
second consecutive year where production growth would fall short of
population growth, resulting in a drop of rice production on a per caput
basis.

Trade
International trade in rice in 2008 is currently foreseen to reach
29.9 million tonnes, 1.1 million tonnes lower than the revised 2007 trade
estimate. The very tight supply situations that most exporting countries may
face until the last quarter of the year and the associated restrictions on
exports lay much behind the anticipated drop of rice trade in 2008.
Currently, China, India, Egypt, Viet Nam, four among the traditional rice
exporting countries, as well as Cambodia, have either imposed minimum export
prices, export taxes or export quotas/bans. Such moves are expected to
reduce rice exported from these countries. As for imports, the drop reflects
prospects of lower shipments to Bangladesh, Indonesia and the Islamic
Republic of Iran, as supply and demand situation in those countries may ease
somewhat compared with last year.

Prices
Since January 2008 international rice prices have seen a steep
increase of about 20 percent, according to the FAO All Rice Price Index. For
instance, in March 2008 the high quality Thai 100% B was quoted US$ 546 per
tonne, up 13 percent compared to February and 68 percent higher than in
March 2007.

Recent sudden price rises reflect the very limited supplies available
for sale, especially given the wide range of restrictions imposed by key
major exporting countries. The tendency for further price rises, however,
may diminish somewhat in the next few months, with the arrival of new rice
harvests in Brazil or Uruguay but also in Bangladesh, India, Indonesia,
Thailand and Viet Nam. ?So far, prospects regarding these crops are
positive,? Calpe said.


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