Cereal chain

Rice : a tight world market

01 June 2013

With world production and consumption almost in balance, rice looks like a market under control. However it is a closely monitored commodity, where exports are marginal, and demand is steadily growing.

R ice is now the world’s second most grown cereal, with 487.5 million “milled equivalent” – i.e. in edible form – tonnes produced annually. It is grown on all four continents, but production nonetheless remains mostly concentrated in Asia where just seven countries (China, India, Indonesia, Bangladesh, Vietnam, Thailand and Burma) grow 80%.

In terms of consumption, the annual world tonnage, which accounts for almost all world production, comes to 478 million tonnes. Rice in fact has the singular feature of being grown almost wholly for home consumption. In Asia, it is people’s main foodstuff, with on average 80kg consumed per capita, and even over 130kg a year in Laos, Burma and Bangladesh.

A “precariously balanced” market  

So only 38.5 million tonnes, or 7.5% of the rice produced, is traded on the world market, against 12% for maize, 18% for wheat and 30% for soya. Some of the leading producers, such as China, are even short so have to import. In this situation, world rice stocks remain low, which increases the risk of price volatility.

So a “precarious balance” governs the market. Concentrated in Asia, production is vulnerable to bad weather. The world’s top four exporters (India, Vietnam, Thailand, Pakistan) are also subject to the same risk.

Moreover, while demand is increasing steadily (2% a year), powered by population growth in developing countries, the area under paddy cultivation has tended to reduce because of pressure due to urbanisation. As rice needs water and sunshine, the areas that can grow it are limited. It is mainly the improvement in yields (4.5T/ha is the world average) that has thus enabled production to increase.

A political commodity

So it is understandable why rice is now a “100% political” commodity, and the rice market is controlled by governmental decisions. The priority goal for producing countries is to guarantee self-sufficiency in food, to prevent starvation if rice is in short supply, and to control inflation which can itself cause instability.

Government intervention can range from maximum export quotas to an export ban (prohibiting all exports), and may include setting a prohibitive MEP (minimum export price). It can also include production subsidies and a policy of buying up very large quantities, which enables the price to be controlled.

So rice avoids the classic rules for trading other cereals, with most exports being managed government to government (known as “G to G” agreements), in exchange for other commodities, which is not the practice on western markets.

The case of Europe  

At the margins of this global context, Europe is a special case, consuming 2.5 million tonnes of rice a year (4kg per capita on average in France), 75% of it produced in Europe. Imports are only 600,000 tonnes of Japonica type “specialities” (scented, cooked and precooked rice).

Soufflet Alimentaire, in addition to its business in France’s Camargue (see opposite), sources these special types of rice worldwide, using its expertise to find supplies and origins most suited to its markets (OHC, the retail trade and user industries). In a team of six people, the Buying Department has a Quality Manager specifically for the raw material. Every year, Soufflet Alimentaire sells 126,000 tonnes of rice in Europe, one third of which is bought outside France.

 

Our approach

Right from the outset, the Soufflet Group developed itself in the wheat and barley industries by broadening the scope of its activities and acquiring more in-depth expertise from collection to transformation. Controlling all aspects of the production chain, in order to serve all its stakeholders, has always been our culture.