INTELLIGENCE MEMORANDUM THE WORLD RICE SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700050062-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 11
• Document Creation Date: December 20, 2016
• Document Release Date: March 13, 2006
• Sequence Number: 62
• Publication Date: November 1, 1973
• Content Type: IM

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Confidential
Intelligence Memorandum
The World Rice Situation
On file Department of Agriculture release
instructions apply.
Confidential
ER IM 73.65
November 1973
Copy No. 15 3
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CONFIDENTIAL
The World Rice Situation
Since mid-1970, world rice production has declined, stocks in all countries have been
drawn down, importing countries have been left with unfilled demand, and prices have
moved up sharply. The harvest that began in August in the United States and in October
in Asia is expected to bring at least temporary relief. Output will not be adequate to
rebuild stocks, however, and another period of short supplies is expected in mid-1974.
Following the bumper crop of 200 million metric tons (excluding China and North
Vietnam) in 1969/70, world rice output declined by about 9% to 182 million tons in
1972/73. The downturn reflected production cutbacks by some exporting countries and
poor rice-growing weather, crop disease, war, and pricing problems in a number of Asian
countries where most of the rice is grown and consumed. Production in the current crop
year is expected to return to about 200 million tons as a result of improved weather
in Asia and increases in the area planted around the world.
With less than 5% of production normally entering international trade, the export
market quickly moved from a situation of surplus stocks and depressed prices in early
1971 to the lowest stocks and highest prices on record by mid-1973. As a result, many
importing countries had to shift co other grains to feed their populations. By drawing
on the current harvest, the United States -- the largest exporter - will be able to maintain
exports in 1973 at nearly 2 million tons, but total world exports will be only about
6.5 million tons. Exports may reach 7.4 million tons in 1974.
Although prices are now falling some and probably will decline further in early 1974,
world demand will continue to press hard on supplies, and prices may move up again
be 're the next crop becomes available in the latter part of 1974. Demand for US exports
on concessionary terms will continue to b:. high, but the rice may not be available at
reasonable prices.
The longer range outlook is for continued sharp fluctuations in the world rice market.
Even with increased use of high-yielding seeds, rice output in Asia probably will increase
by only about 3% annually. A number of countries will remain heavily dependent on
imports, especially in years of poor crops.
Note: Comments and queries regarding this memorandum are welcomed. They may be
directed to
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Introduction
I. Since mid-1972 a number of countries of Asia. where most of
the world's rice is grown and consumed, have been unable to buy the
amounts of rice needed to feed their growing populations and curb steep
increases in domestic prices. Tightness in the world rice market is the result
of a decline in production during the past three years.
Production Trends in Recent Years
2. World rice production, excluding China and North Vietnam,l
declined for three successive years following a peak output of about
200 million tons in 1969/70 (see Table 1). The first two years of the
downtrend resulted from production cutbacks in the United States and
Japan and poor weather, crop disease, war, and pricing problems in a number
of Asian countries.2 Last year, erratic and sparse rainfall across Asia, Africa,
the Middle East, and South America caused a 6%, drop in production. Recent
trends in world production .are indicated by the following indexes.
Index 1969/70 = 100
United States
and Japan
Other
World
Total
1970/71
88
99
98
1971/72
78
99
96
1972/73
84
92
91
Rice Trade and Prices
3. Most rice is consumed in the producing country; less than 5%
of world output enters international trade. Therefore, even minor shifts
in production or stock accumulation may have a large effect on trade. When
production declines, demand for imports normally rises even though each
country attempts to offset a crop shortfall by belt-tightenii;g, drawing down
stocks, and switching to other foodgrains. If exportable stocks have already
No reliable time ser es s available for China or North Vietnam. China produced an estimated
105 million to 110 million tons of paddy rice in crop year 1971/72. (Crop years begin on 1 August
of the first stated year.
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Paddy Rice Production, by Major Producers)
1969,70
1970/71
1971/72
1972/732
1973/743
World total4
200
196
193
182
200
United States
4.1
3.8
3.9
3.9
4.3
Japan
Major Asian producers
18.2
15.9
13.6
14.9
15.3
Thailand
13.4
13.6
13.7
12.0
14.0
Bangladesh
18.2
16.7
15.0
15.0
19.0
Burma
8.0
8.1
8.2
6.8
8.0
Cambodia
3.8
3.8
2.7
1.0
G.8
India
60.6
63.7
64.5
55.5
65.0
Indonesia
16.2
18.4
19.3
18.8
19.0
Pakistan
3.5
3.2
3.4
3.5
3.5
Philippines
5.2
5.3
5.1
4.6
53
South Korea
5.5
5.6
5.8
5.3
5.5
South Vietnam
5.1
5.7
6.3
5.9
6.1
Taiwan
3.0
2.9
2.7
3.1
3.9
Other
35.2
29.3
28.8
31.7
30.3
1. For crop years beginning 1 August of first-stated year.
2. Preliminary. For a few countries, significant differences exist between the estimates published
by the Department of Agriculture and information available from other sources. In general, however,
xc u ng China and North Vietnam, for which reliable data are not available on an annual
basis. Chinese production is estimated at 105 million to 110 million tons In 1971/72,
been drawn down, world prices can rise sharply. All of these elements were
present in 1972, as the world rice market shifted from a condition of readily
available supplies to one of shortages.
4. In 1970/71, surplus stocks in exporting countries depressed world
prices and brought special export efforts, including price cutting and sales
with soft long-term loans. Exports increased from 6.8 million tons3 in 1969
3. Although worldwide production data are available on a paddy rice and crop year basis, trade
data are available only for milled rice by calendar year. Milling rates vary from 0.60 to 0.75. An
average rate of 0.65 may be used to convert to milled rice equivalents.
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to 7.8 million tons in 1971 (see Table 2). Some Asian countries took
advantage of the low prices and easy credit to raise consumption,
substituting rice for less preferred grains. South Korea, which had increased
imports steadily since 1965, imported more than I million tons in 1971.
World Exports of Milled Rice: by Country
1970
1971
19721
19731
19742
Total
7,561
7,801
8,300
6,515
7,420
Australia
Ill
186
172
190
220
Brazil
95
129
149
125
Burma
719
800
510
100
300
China
935
745
800
900
900
Egypt
654
515
456
350
500
Italy
347
438
428
200
500
Japan
630
960
200
650
200
Pakistan
482
467
300
700
600
Thailand
1,062
1,576
2,076
950
1,600
United States
1,740
1,415
2,034
1,950
2,000
Other
786
630
1,175
400
600
Indonesia imported between 500,000 and I million tons each year during
1970-72. The Philippines, South Vietnam, and Cambodia increased imports
to offLet production problems. The resulting trends in world exports and
prices are indicated in Table 3.
5. The export situation changed rapidly in mid-1972. Surplus stocks
had been liquidated, and prospects for the 1972/73 crop were poor. In
the Northern Hemisphere, stocks are normally at their seasonal low from
June or July until the new harvest begins -- in August in the United States
and a few months later in Asian countries. In mid-1972, Thailand, Burnma,
and Brazil temporarily restricted exports because of domestic shortages and
steeply rising internal prices. Japan and Pakistan had only small quantities
of poor-quality rice available for export in the last half of the year. By
I August, the US carryover stock was down substantially, and much of
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Table 3
Indexes of World Rice Exports and Prices
1963=100
Export Volume
Average Price
1963
100
100
1964
104
95
1965
109
95
1966
103
115
1967
96
154
1968
88
141
1969
92
130
1970
103
99
1971
106
89
1972
113
106
19731
88
160
1. Estimated.
it already was committed, Despite these problems, world exports reached
a record level of about 8.3 million tons in 1972. A number of Asian
countries nevertheless were left with unfilled requests and had to import
other foodgrains instead of rice. By December 1972, export prices had
increased nearly 50% compared with those of a year earlier (see Table 4).
Exports During 1973
6. Only some 6.5 million tons of rice will be exported this year.
Export sales were small and sporadic from June until the US crop became
available, and wholesale prices have increased by nearly 50%% since 1 January
(see Table 5). Thailand ceased quoting export prices in March and banned
further large export commitments in June until the size of its 1973/74
crop could be determined. Limited rice exports were resumed in October,
and price quotes for the winter harvest may be issued in November. Burma
and Italy also banned exports to protect domestic markets. These three
countries may account for the total decline of 1.8 million tons expected
this year.
7. The United States is the only major exporter that ships much
of the fall harvest before the end of the calendar year. The first part of
the crop normelly is available for export in September. As a result of this
year's poor weather (which delayed both planting and harvesting) and low
stock, exports in August and September were held to 150,000 tons -- about
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Thailand: Export Prices for Miller! Ricer
US $ per Metric Ton
January
181.20
154.20
139.20
133.81
191.50
February
178.80
151.20
125.10
129.50
194.00
March
185.28
143.04
115.20
130.50
208.052
April
183.60
139.20
112.80
131.05
May
190.80
139.20
123.84
135.35
June
197.76
141.60
127.20
135.35
July
198.60
142.80
129.00
147.35
August
188.40
145.68
131.52
171.00
September
186.68
142.20
136.20
166,20
October
185.40
142.50
133.80
170.90
November
186.00
141.60
130.80
178.00
December
178.56
138.00
127.80
188.80
1. Prices relate to firs(-quality Thai white rice (5% brokens), which is tiaditionaily used to indicate
world price trend;? The data are for the end of the month. The prices are f.o.b. Bangkok.
2. Thailand suspended price quotations on 5 March 1973.
United States: Wholesale Price for Milled Ricci
US $ per Metric Ton
Monthly average
191
216
3302
.'anuary
190
196
284
February
190
196
284
March
190
196
284
April
190
196
337
May
185
201
337
June
192
201
337
July
192
201
337
August
192
201
359
Scptcmbcr
192
220
408
October
192
231
November
192
276
December
196
276
I. trice in New Orleans market.
2. January-September averattc.
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40% less than last year. Shipments are expected to move rapidly during
the last quarter, and the 1973 volume should approach the 2.0 million
tome exported in 1972. Export prices appear to have peaked in October.
Both US domestic and export sales were brisk in late October and early
November at slightly reduced prices. Prices are expected to decline further
when the Thai crop comes on the market later this year.
Current Crop Outlook and 1974 Trade Prospects
8. The 1973/ 74 rice crop is expected to be excellent, probably
equaling the previous record (see Table 1). Monsoon rains in Asia were
favorable; acreage was expanded in most countries; summar floods and
typhoons caused only limited damage; and harvesting, although just getting
under way in southern Asia, is progressing well. Output of all major Asian
producers except Japan and Cambodia is expected t- about equal or exceed
1969/70 levels. Although Japan die not expand acreage this year, output
increased because of higher yields. The rice crop in Pakistan was not
damaged as much by the September floods as was first expected. US farmers
were permitted to expand acreage by 20% this year, but production is not
expected to increase to the same extent. The generally late spring and storm
damage in the southern growing areas during September reduced the crop,
according to the Department of Agriculture's 1 November estimate, to
4.3 million tons, a 12% increase over last year's harvest. Italy is harvesting
about 1.0 million tons, a 10% increase over last year's, and other countries
that contribute to the export market are expected to have normal crops
on the average.
9. Larger crops will mean a more comfortable supply situation in
a number of Asian countries during the early part of 1974, but more than
one good crop will be required to replenish stocks because demand will
continue strong. By mid-1974, supplies may become tight and prices high
again, although the shortage is not likely to be as severe as it was this
year. Estimated exports in 1974 will be about 7.4 million tons, up by nearly
I million tons from 1973, but still considerably below the 1972 high (see
Table 2). This level will not allow importing countries to obtain all they
want for current consumption and stock rebuilding. South Korea, the
Philippines, Indonesia, South Vietnam, Cambodia, and Bangladesh will want
more rice than is likely to be available to them.
10. Of the approximately 2 million tons available for export from
the US crop, about 600,000 tons probably will be shipped under the PL-480
program, mainly to South Vietnam and (Cambodia. PL-480 exports were
1.3 million tons from the 1971 /72 crop and 940,000 tons from last year's
crop. Because of a legal restriction that prohibits disruption of the
commercial market by PL-480 shipments, there is still some question as
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to whether 600,000 tons can be purchased. About 200,000 tons probably
will be purchased by the end of November. If the tight market cases later
this year and is stable during early 1974, careful buying in small quantities
of the remainder may not increase prices significantly. Although purchases
financed under PL-480 in some instances replace commercial purchases that
otherwise might be made, on balance they increase demand. US experts
predict that commercial export commitments may amount to 1.2 million
tons by the end of December, leaving only about 800,000 tons available
in the first eight months of 1974 to meet commercial and PL-480 needs.
11. Next year's rice market could be cased measurably if China
decides to increase rice exports as it did in 1966 and 1967, when world
prices were unusually high. At that time, China exported more tl -,n
1 million tons each year, cornpm.red with exports of 600,000 to 800,00
tons during 1963-65. Peking reportedly has increased imports of wheat and
corn this year to free large quantities of rice for export.
Crop Prospects
12. For most countries, rice output will as usual depend mostly on
the. weather. Production in the United States probably will increase
substantially in 1974, provided that prices do not decline markedly before
the spring planting season. The Department of Agriculture has announced
the removal of rice marketing quotas and fixed price supports at 65% of
parity for a minimum acreage - changes that the Department of Agriculture
predicts could increase output by 30%40% in one year. Jaikan also is
expanding acreage, and several other Asian countries are trying hard to
increase production.
13. Given average weather, output in Asia during the next several
years will increase at an average of about 3% annually, a rate barely
sufficient to keel) pace with population growth and provide modest
improvements in diets. The use of high-yielding seeds continues to spread
slowly - reportedly to about 17% of the total rice area of South and
Southeast Asia in 1971/72 -- but average yields have remained low for lack
of fertilizer and irrigation. Research is continuing to improve cooking
qualities and disease resistance, two factors that limited the use of these
seeds at first. The major long-term problem in achieving the potential of
the high-yielding seeds is the small area that has adequately controlled water
supply. A number of countries will continue to be heavily dependent on
imports, especially in years of poor crops.
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