Rising Red Dragon In Rice Trade
India is well known across the globe for its rice varieties and rice quality. In a major shift, the all-time high rice importer China has now switched its gears from major importer to exporter. Here is how Red Dragon had emerged in world rice trade.
For several years, China has been the top rice importer, but now Chinese exports have begun to show a growing impact on global trade patterns. Its current dual roles, as ‘top importer and re-emerging exporter’ make it a linchpin to global trade. It is time for India to realize that with rising production level of rice, it will have to prepare itself with a direct competition in rice trade with the Peoples Republic of China.
Although China has had a tariff-rate quota (TRQ) for 5.32 million tons since 2004, for years it was far from filling it. China emerged as a major rice importer in 2012 as domestic minimum support prices remained high, while many exporters’ price fell when India lifted its export ban. Since that time, imports have sky-rocketed, with a rising TRQ fill rate and strong trade along the borders. Now, more than a tenth of global exports are destined for China, a critical market for many of its neighbouring suppliers.
Chinese Presence in Global Rice Trade
(Source: Global Agriculture Information Network, USDA)
In 2017, over 10 per cent of Thai exports were to China, whereas for Vietnam it was over one-third and for Burma, it was more than half. Despite ample domestic production and near-record stocks, imports are expected to remain strong – so long as the price difference remains between Chinese domestic prices and the lower prices offered by neighbouring suppliers. A recent announcement to reduce the ‘out-of-quota’ tariff for broken rice suggests openness to continued imports.
Oddly, even in the year of record imports, China is also returning as a rice exporter. In the past few years when its prices have been well above global long-grain prices, it has maintained its core medium-grain markets in neighbouring countries. Although domestic new-crop prices remain high, the old-crop prices are significantly lower. Over the past year, sales from reserve auctions have accelerated, bringing rice as old as 2013 into the market. China’s exports expanded in 2017, primarily low-priced, old-crop shipments to African markets.
The re-entry to the African market (the top destination market around the turn of the century) in the latter part of the year, coincided with the downturn of Thai old-crop rice exports to that region as its own government stocks have been nearly exhausted. To a lesser extent, China is also stepping up its exports to Asian and Mediterranean medium-grain markets and expanding food aid commitments. Exports have not been this high for 15 years when China sought to reduce its voluminous stocks. During that time, China was a significant exporter and now, certainly has the supplies to become one again, posing a direct challenge to Thai exports and Supreme Indian quality rice.
