The influx of demand from feed buyers in the wake of the Russian invasion of Ukraine has raised numerous questions over the direction of the Asian low-quality white rice market.
Rice markets reactBut the demand from feed buyers has spiked in both India and other Asian rice markets since the Ukraine conflict began. In India, for example, sources have reported instances of defaulting and low supplies, with one Kakinada-based exporter going so far as to describe the local broken rice market as a "disaster" due to the sudden influx of demand. In rice export origins which are also destination markets for corn and/or wheat, such as Vietnam, many exporters have withdrawn their broken rice offers due to high domestic demand. Vietnamese 100% broken white rice price has increased by $65/mt since the invasion of Ukraine, reaching a high of $370/mt FOB on March 25, according to Platts assessment from S&P Global. However, many sources view broken rice prices from Vietnam as hypothetical, with the country even importing substantial volumes from India to meet demand. In traditional broken rice markets -- notably in West Africa -- the situation is more immediately concerning from a food security perspective. In Senegal, which is a huge market for broken rice for human consumption, a sizable gap is opening up between current retail prices and replacement costs. While in part this is due to Senegal's new retail price cap and high freight rates, the significant rise in Indian broken rice prices in recent weeks has only served to widen this gap. According to one Europe-based trader who buys for the country, this gap has reached $90/mt in recent days, and made it "impossible" to buy for Senegal at present without taking on huge financial risks. However, with sufficient stocks in Dakar for Ramadan and the following weeks, the trader added that it makes no sense to re-enter the market before the religious holiday is over, with hopes that the replacement cost gap will have narrowed in the interim.
Unusual price spreadsBecause of the massive influx in demand for Asian broken rice, unusual price spreads between different rice grades have emerged. Pakistani 5% and 100% broken white rice were briefly assessed at par earlier in March while the gap was $70/mt a year prior. The spread between Thai 5% and A1 Super 100% broken white rice has narrowed to only $2/mt in recent days, compared to $51/mt a year prior. One major Singapore-based rice trader said that "some 25% [broken white rice] shipments for feed purposes" was seen from Myanmar to Europe. Sources buying from the Myanmar market have reported that offers of low-quality B234 broken white rice have been largely unavailable in recent weeks due to high feed demand, with higher quality broken rice prices also moving up substantially. Despite sources reporting no obvious reason for why feed buyers could not turn to 25% broken white rice if 100% broken white rice was unavailable, or priced uncompetitively, sales of this product for feed purposes so far remain rare. A second Singapore-based trader said that they were advising their traditional broken rice buyers in Africa to accept 25% broken white rice due to supply and price issues for 100% broken white rice. However, the first Singapore-based trader cautioned that this would ultimately "depend on corn prices." FAO's Shirley Mustafa agreed, saying that "because this trend is influenced by factors outside of rice markets, developments in these external markets will have an important bearing." Mustafa added that "current forecasts suggest record-breaking supply availabilities in the major exporters this season, thanks to bumper harvests expected in India, Pakistan and Thailand. If these are realized, they should be more than sufficient to cater to the higher global needs."
Outside forcesDespite uncertainty surrounding how this situation will play out, it is almost inevitable that feed demand will take up an unusually large portion of international rice sales in 2022. A third Singapore-based trader said that it will "not be a huge chunk ... But it will not be insignificant either." The questions which remain at this point are whether 25% broken white rice sales for feed will become more widespread and how this demand for cheap rice will impact traditional buyers of 25% and 100% broken white rice for human consumption. However, with rice still a minor player in the massive global feed market, the situation will ultimately remain at the mercy of outside forces.
The Party has crafted a narrative that credits the nation’s leadership for being able to deal with nation’s challenges. Citizens are expected to place their faith in their party and their leader Xi Jinping. However, China’s food security faces certain perils.The Great Chinese Famine (1959-61) a man-made disaster during the Great Leap Forward movement which is said to have killed nearly 45 million people.
Journey towards food self-sufficiencyChina holds the distinction of being the world’s largest importer of food products—grains, meat, and seafood included. It is also the fourth largest buyer of agricultural land abroad. However, the outbreak of the COVID-19 pandemic left an adverse impact on international food supply chains and although China has ample stockpiles of corn, rice, and wheat, it depends on global markets for pork and soybean which are part of the staple Chinese diet. The world continues to view China’s aggressive rise with suspicion, especially as it does little to allay the fears of the international community. Trade frictions, allegations of food hoarding and land grab, belligerent military posturing in Asia-Pacific, and the overall global perception of its handling of the COVID-19 outbreak—these are merely a few reasons for China to accelerate efforts to look inwards and attain self-reliance.
To further exacerbate food insecurity concerns, there were widespread incidents of panic buying and hoarding in November last year, when a Ministry of Commerce directive to local governments to stabilise food prices for winter months was widely speculated to mean a possible incoming COVID-19 wave or an outbreak of war with Taiwan.Although China has ample stockpiles of corn, rice, and wheat, it depends on global markets for pork and soybean which are part of the staple Chinese diet.
Policy changes over the last few yearsOver the years, China has shifted its policy focus towards self-sufficiency in food. In the 1990s, China’s leadership ordered for establishing a National Grain Stockpile to coordinate central and regional food reserves—which today is claimed to be one of the world’s largest stockpiles. In 2006, a ‘red line’ was established, under President Hu Jintao, at 1.8 billion mu of land (120 million hectares) to ensure that urbanisation and industrialisation drives did not encroach into arable lands that was to be utilised for agriculture.
An ambitious target of 95 percent self-sufficiency in grains was set, i.e., 95 percent of domestic demand should be met through domestic supplies—which China claims it has ensured till date. To ensure accountability in provinces, political responsibility to prevent food shortages was assigned to provincial governors and local party functionaries. In April 2021, President Xi Jinping through the National Congress enacted a law that banned binge eating and food wastage to instill values of conservation amongst the general public.President Xi Jinping through the National Congress enacted a law that banned binge eating and food wastage to instill values of conservation amongst the general public.
Seeds are the new ‘semiconductor microchips’In 2021, the Chinese central authority issued the year’s first policy document called ‘Document No. 1’, which is seen as an indicator of national policy priorities. For the 18th consecutive year, the document focused on food and agriculture. However, a significantly important policy change was in the promotion of Genetically Modified (GM) technologies in seed industries and commercial usage of GM crops. China’s Agriculture Minister Tang Renjian declared that seeds are the new “semiconductor microchips” in agricultural technology, and they shall be instrumental in securing grain output. Unlike countries like USA where private players are involved in three-quarters of the research in seed technologies that leads to commercial applications, in China, the number stands at 10 to 20 percent. Thus, CCP has instructed the Ministry of Agricultural and Rural Affairs to provide the government’s direct support to leading private seed enterprises. Acquisition of multinational corporations has been considered the quickest way for China to acquire seed technology. One of the most high-profile acquisitions has been that of Swiss food-tech giant Syngenta in February 2016 by state-owned ChemChina for US $43 billion.
On 24 December 2021, China adopted a revised Seed Law which shall come into effect from 31st March 2022. The revised law increases commercialisation and standardisation of GM technology in the seed industry and brings it in line with international standards. However, Chinese government has been drawing flak for promoting GM foods.CCP has instructed the Ministry of Agricultural and Rural Affairs to provide the government’s direct support to leading private seed enterprises.
Challenges aheadDespite China’s leadership’s go-ahead for GM corn and soyabean after passing them through biosafety evaluations in 2020, it has met with resistance from the Chinese public at large. Policymakers in Beijing have been unsuccessful in building trust amongst the citizens that GM foods are safe for consumption. The public has seen its share of food safety scandals in the past. However, this is only part of the problem. Till date, China continues to be an agrarian society but it faces the daunting task of feeding the world’s largest population on just 7 percent of world’s arable land. A survey conducted by the Ministry of Natural Resources stated that China’s arable land area towards the end of 2019 had reduced by 6 percent to 1.28 million square kilometres, as compared to 2009—a majority of it converted into forests, urban areas or industrial hubs. Since 1990s, incessant and inefficient use of chemical fertilisers has polluted and depleted groundwater table and soil quality. China also happens to be the largest emitter of greenhouse gases in the world since 2006. In 2020, China’s carbon emissions broke records by reaching nearly 14 billion tonnes (GtCO2) contributing to 27 percent of the global emissions, as per reports by the Rhodium Group. Particularly, a major source of carbon emission in China arises from livestock cultivation. As per the ‘Journal of Integrative Agriculture’, net greenhouse gas emissions from the pork industry in China increased 16 million tons (Mt) of carbon dioxide equivalents (CO2eq) during the study period 1976-2016, further adding to the national carbon footprint. The greenhouse gas emissions have a direct contribution to loss in crop yields. According to a study by Nature Food, China saw an increase in Ozone pollution resulting in diminishing yields of wheat, rice, and maize at 33 percent, 23 percent and 9 percent, respectively.
In 2021, heavy rainfall led to flooding in many provinces in China. Henan province, for one, experienced loss of 2.4 million acres of crops fields. The province produces one-third of China’s wheat supply and nearly one-tenth of its corn, vegetable, and pork. The World Meteorological Organization (WMO) has hailed climate change caused due to anthropogenic factors as the main reason for flooding in China and other countries. Thus, the need of the hour for the leadership is to ensure the adoption of sustainable and environmentally safe practices in food production. The socio-economic effects of the ageing population in China, especially in rural areas, have an impact on food production and consumption. Urbanisation rate in China was at 57 percent in 2016, and might go up to 65 percent by 2025, and 80 percent by 2050. These figures raise an important question—who shall be a part of food production in rural areas if society continues to undergo such transitions?The World Meteorological Organization (WMO) has hailed climate change caused due to anthropogenic factors as the main reason for flooding in China and other countries.
ConclusionEver since he came into power 10 years ago, food security has been one of Xi’s prime areas of focus. “Food security is an important foundation for national security. Guaranteeing national food security is an eternal issue, and this string cannot be loosened at any time” claims the President. The ‘string’ which Xi refers to is extremely vital to the longevity of his presidency. In 2013, he had reminded his officials to take heed of USSR’s disintegration in 1991 and to keep in mind the reasons for the same—that the then Russian leadership had permitted the public denigration of Soviet leaders like Lenin and Stalin. In China, excessive rise in food grain prices was one of the factors that led to the Tiananmen Square protests in 1989 and Xi will not let public criticism of food security programmes adversely affect his political career. The National Congress, which assembles once in five years, shall convene towards the end of this year and determine who forms part of the future leadership, which Xi aspires to lead. Despite enacting a national anti-food wastage law, Beijing must realise that China has transformed into a relatively more prosperous country. With growing urbanisation and rising income levels in urban and rural areas, dietary consumption is bound to increase in the world’s largest population. The CCP had always promised its people abundance in food and grains. Now that citizens have begun to enjoy the fruits of a ‘moderately prosperous society’, an important question arises—are various components of China’s food policy realistic enough to secure the ‘rice bowl’ or are they mere political gimmicks to secure Xi’s presidency?
Less from ThailandMeanwhile, the amount of rice Thailand has been exporting, especially to Africa, has dwindled, as Thailand is left with only the no-longer-good-for-human consumption rice within the country’s domestic stocks. “Given Thailand’s ending of exporting especially low-priced rice to Africa, China has been able to see some in roads into Africa, as well as beyond,” said Trego, who is a regular contributor to USDA’s World Agricultural Supply and Demand Estimates. “Notably, China’s average export price as reported by China’s custom data developed precipitously in 2017, and this has been quite interesting in that the Chinese customs data also shows that the exports have primarily been of medium-grain rice. Seeing prices in the $500 per range on average for total exports is certainly a shift from where they have been in the past.” With China becoming a top importer of rice, as well, U.S. growers are asking where the U.S. stands on its ability to tap into the Chinese import market, which up to now has been confined primarily to nearby rice-producing countries such as Burma and Cambodia. “USDA has been working actively on a phytosanitary protocol for access of rice to China, and this process has lasted for more than a decade,” Trego said. “On the U.S. side, USDA’s Animal Plant Health Inspection Service has been working with the AQSIQ, the comparable agency in China. We had it signed a couple years ago at the technical level, but we were waiting for it to be signed at the political level, which was finally accomplished in 2017. “Although the phytosanitary protocol has been signed, there remain a few steps, including a questionnaire that has been sent to the United States regarding some of the facilities as well as audits,” Trego noted. “While the phytosanitary protocol has been signed, there are still some steps to take before we can begin to see U.S. shipments of rice to China.” Judging from Chinese domestic prices relative to some of the California export prices, U.S. export quotes at times have been lower than Chinese retail prices. “That may suggest some opportunities to be able to ship to China if given the opportunity once the phytosanitary protocol and the necessary arrangements are accomplished,” Trego said.
Types of riceDuring the question and answer session of the webinar, Trego was asked what types of U.S. rice would be competitive in China’s markets? “The predominant suppliers right now to the China market have been some of the neighboring countries that are sending long-grain rice,” she said. “As noted from that exporter export quote chart earlier, the Asian prices for long-grain are quite a bit lower than those for the U.S. “So for long-grain it would primarily be focusing on some of the high-end and niche markets. China has been importing, especially because of price, but also because of concerns on food safety, and so really targeting the high end would be helpful for that on long grain.” For the medium- and short-grain, China has a Tariff Rate Quota for medium-grain, and the U.S. is a predominant medium-grain exporter and is relatively competitive. “Given the price chart I shared earlier for Chinese retail versus U.S. prices, given the limited competition from other medium-grain suppliers in that market, there could be some great opportunities.”
Source: Xinhua| 2017-05-30 05:45:21|Editor: Mu Xuequan
Cambodian milled rice is becoming increasingly popular in China
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