Industry: May rewrite China's rice import pattern, with soaring international rice prices and multiple countries banning export markets | prices | exports

Recently, India, the United Arab Emirates, and Russia have successively issued orders to ban rice exports. In addition, global rice prices jumped to the highest level in 11 years in July, which has attracted high attention from the outside world.

Zhang Zhixian, Vice President of China Grain Network Yida Research Institute, told First Financial reporters that for the three countries mentioned above, due to their different positions in global rice exports, although they have all done the same thing of banning rice exports, the impact is completely different.

He believes that banning grain exports is also a double-edged sword. On the one hand, it is conducive to stabilizing domestic market prices at specific stages and driving up international market prices; On the other hand, it may also affect the credibility of exporting countries and result in the loss of global food market share.

It is worth noting that although the import volume of rice and rice in China exceeded the import tariff quota for the first time last year, the import volume of rice and rice decreased significantly in the first half of this year, only 1.81 million tons, a year-on-year decrease of 49.6%. Zheng Wenhui, a grain economy researcher at Guangdong South China Grain Trading Center, told First Financial reporters that the contraction in demand for rice imports in China is due to soaring international rice prices, extreme global weather, and tightening export policies in India.

In the face of the difficulty of a significant decline in international grain prices, the industry expects that the overall import volume of rice in China will still be low in the second half of this year. However, influenced by the established consumption habits, the import scale of refined rice in China will still remain relatively stable. However, it is also important to note that if international rice import prices continue to be significantly higher than domestic rice, then grain source adjustment is imperative, which will also rewrite China's rice import pattern.

The ban on rice exports and the rise in rice prices

Recently, the three countries banned the export of rice, which began on July 20th. At that time, India announced a ban on the export of rice other than steamed rice and Indian fragrant rice to ensure domestic market supply, which came into effect immediately.

A stone stirs up a thousand waves. Rice is the staple food for about half of the world's population, and India is the world's largest exporter of rice, accounting for over 40% of the world's total rice exports. A ban in India has triggered panic buying of rice in multiple countries, boosting rice prices.

Subsequently, on July 28th local time, the UAE decided to suspend rice exports for four months, including rice imported from India to the UAE after July 20th, and apply to all rice varieties, including brown rice, whole polished rice, or semi polished rice.

On July 29th local time, Russia also announced that it will continue to temporarily ban the export of its own rice and broken rice until December 31st of this year. The ban on rice exports in Russia began on July 1, 2022, and was originally valid until December 31 of the same year, but was later extended to June 30 of this year. Now, the validity period of the export ban has been extended to the end of this year.

Zhang Zhixian stated that the measures taken by these three countries to ban rice exports are aimed at ensuring domestic rice supply and stabilizing domestic rice prices. However, the impacts vary. India has the greatest impact, while the United Arab Emirates and Russia are far behind the former.

Specifically, due to the impact of rainstorm and drought, the price of rice in India fluctuates significantly, and India needs to stabilize the domestic rice market. Of course, India holds a crucial position in the field of rice exports, and the ban on exports also demonstrates its enormous influence on the international rice market. Moreover, it does have a significant impact on international rice supply and prices.

As for the United Arab Emirates and Russia, the former themselves are food importing countries with high dependence on foreign countries. Its ban on rice exports aims to address the potential impact of extreme weather on food supply, and has little impact on the international market; The latter, as not a major global exporter of rice, has a relatively small actual impact. However, considering the increasing uncertainty of grain exports in the Black Sea region at this time, the geopolitical significance of banning rice exports has become more prominent.

From the global rice export data, this conclusion can also be confirmed. According to data from the Food and Agriculture Organization of the United Nations, Russia has exported approximately 100000 to 150000 tons of rice in recent years. The United Arab Emirates itself is a rice importing country. Both countries have a small proportion in global rice trade, and their actual impact on the global rice market can be ignored. However, it will to some extent amplify market panic and push up global rice prices.

In terms of global rice prices, since July last year, the international rice market has entered an upward cycle. According to data from the National Grain and Oil Information Center, measured by the FOB export price of 5% broken rice, on August 1st, Thailand's price was 572 US dollars per ton, an increase of 39.5% from July last year, approaching a 10-year high. Vietnam's price is $545 per ton, a 30% increase from July last year, reaching a new high in 10 years.

Zhang Zhixian stated that the rise in international rice prices can be attributed to three reasons. One is the practical impact of extreme weather. Since the beginning of this year, due to the impact of El Ni ñ o, the global average temperature has continuously broken records. Southeast Asia and South Asia are the world's largest rice producing regions, which have been hit by high temperatures since April; Meanwhile, some rice growing countries in Europe have also generally experienced rare drought conditions in the past 20 years.

The second is global geopolitical conflicts. Due to regional conflicts and wars, global food trade channels have been affected. And major countries around the world have increased their food reserves, thereby driving up food prices.

Thirdly, the main rice production and export areas are concentrated in Southeast Asia and South Asia, and the substitutability of the main production areas is not high. Once affected by weather or other factors, it is easy to experience significant fluctuations.

Zheng Wenhui also mentioned that from a demand perspective, import demand in some Asian countries is still strong. From a supply perspective, major Asian producing countries such as Thailand and Pakistan have strong expectations of reduced production due to the impact of drought, leading to a tightening of supply. In addition, after India banned the export of broken rice last year, it has recently reiterated its intention to ban the export of non Basmati rice.

It is worth noting that for major grain exporting countries, banning grain exports is a double-edged sword.

Zhang Zhixian stated that although this move has certain effects in stabilizing domestic market prices, it will push up international market prices and increase export profits. However, it may also affect the credibility of exporting countries and result in a loss of global food market share. For responsible exporting countries, it is generally less commonly used.

By comparison, as the three countries have recently issued consecutive bans on rice exports, Thailand and Vietnam, as the world's second and third largest rice exporting countries, have not yet followed suit.

New characteristics of rice imports in China in the first half of this year

Overall, China has sufficient rice inventory and supply, with imports mainly focused on variety adjustment. Therefore, although international rice prices have risen, the domestic rice price trend is relatively independent, and the overall performance is characterized by strong fluctuations. Although it has risen, the overall upward trend is relatively mild.

In this context, the price advantage of imported rice is no longer present. With the weakening of the RMB exchange rate in the first half of the year, as of June 28th, the dutiable price of imported rice at port has been significantly higher than that of domestically produced rice of the same grade, leading to a weakening of import demand. The wholesale price of early indica rice in Guangdong is 3710 yuan/ton; The theoretical price of 5% broken rice for port tax payment is 4307 yuan/ton, 4188 yuan/ton, and 4037 yuan/ton in Thailand, Vietnam, and Pakistan, respectively, which is 597 yuan/ton, 478 yuan/ton, and 327 yuan/ton higher than in China.

The prominent feature of China's rice imports in the first half of this year was a significant year-on-year decrease in import volume and an increase in import unit price. According to customs data, from January to June, China imported a total of 1.81 million tons, a year-on-year decrease of 49.6%; The average unit price is 3603 yuan/ton, a year-on-year increase of 33%.

From the perspective of monthly import prices, except for a slight decrease in May compared to the previous month, there is a trend of gradual increase every month. From 3393 yuan/ton in January February to 3925 yuan/ton in June, an increase of 535 yuan/ton within the year, with a growth rate of 15.77%.

From the rice import situation in the first half of this year, there are three obvious characteristics.

One is that the variety structure of imported rice has returned to normal, with polished rice remaining relatively stable and the import volume of broken rice sharply decreasing. Secondly, China's rice imports come from relatively diverse countries, with a balanced market share among major importing countries. From the market share of imported rice, Vietnam, Myanmar, Thailand, India, Pakistan, and Cambodia accounted for 38%, 20.8%, 11.9%, 11.8%, 8.1%, and 8% respectively in the first half of this year, which is relatively balanced overall.

In addition, rankings are usually not fixed. For example, since last year, India has continuously tightened its rice export policy, and China has rapidly adjusted. Imports from India have significantly decreased, and India has also rapidly slipped from being China's largest rice supplier in the past few years to fourth place.

Thirdly, except for a significant increase in imports from Vietnam, imports from other major importing countries have all decreased.

Currently, despite the difficulty of a significant decline in international grain prices, the industry expects that the overall import volume of rice in China will still be low in the second half of the year, but the import scale of polished rice will remain relatively stable.

Zheng Wenhui stated that although the price of imported rice was already higher than that of domestic rice in the first half of the year, and the theoretical import profit was negative, the import volume of polished rice did not significantly decline. This is mainly because after years of development, some varieties such as Vietnam, Thailand, and Pakistan have become commonly used grain sources in Guangdong, China.

According to reports from enterprises, these rice varieties are increasingly favored by the market in terms of taste, grain size, and other qualities. They have formed a relatively stable formula and proportion with domestic rice. In order to maintain market share, even if the import cost is high, they will continue to be used, but the dosage will be reduced. Industry insiders predict that if international rice import prices continue to be significantly higher than domestic rice, it will be imperative to adjust grain sources, which will also rewrite China's rice import pattern.