June Domestic Rice Market Review and Outlook
Since June, the domestic rice market has been generally relatively stable overall, with slight fluctuations in some areas. At the same time, japonica rice auctions continued to see low transaction rates. Meanwhile, demand in the domestic rice market entered the off-season for consumption. In addition, the volume of imported rice climbed sharply. The detailed analysis is as follows:
I. Brief Review of Market Conditions
In June, the domestic japonica rice market continued to run quietly. As the attention of grain-holding entities shifted, supply in the southern japonica rice market decreased somewhat, and japonica rice prices rose somewhat.
In terms of prices, japonica rice purchasing and sales in June showed a pattern of “strong in the south and weak in the north.” Affected by wheat entering the harvest period, the attention of grain-holding entities shifted, supply in the southern japonica rice market decreased somewhat, and market prices were relatively firm. The northeast japonica rice market, however, generally performed relatively weakly, and sales conditions in the sales areas were generally worse than in the southern production areas.
In June, the indica rice market showed a pattern of “new rice hot, old rice cold.” On the one hand, because new-season early indica rice was about to come onto the market, high inventory pressure in the indica rice market strengthened, the desire of various entities to ship out goods strengthened, supply of old rice in the market was ample, demand was weak, and prices faced downward pressure; on the other hand, the quantity of new rice in the market was relatively small and demand was strengthening. After 2014 temporary storage middle and late indica rice was put onto the market, transaction conditions were good.
In June, the price spread between japonica and indica rice rose compared with the previous month, and continued to remain high through the end of June, showing a pattern of “strong japonica and weak indica.”
Monitoring data showed that in early June, the purchase price at grain depots for japonica rice in Hulin, Heilongjiang was 3120 yuan/ton, and the purchase price for late indica rice in Changsha, Hunan was 2800 yuan/ton; at the end of June, the purchase price at grain depots for japonica rice in the Hulin area of Heilongjiang was 3100 yuan/ton, and the purchase price for late indica rice in the Changsha area of Hunan was 2800 yuan/ton.
In June, because rainfall in the south was relatively heavy and temperatures gradually rose, both rice storage and processing costs rose somewhat. Rice sales in the sales areas clearly turned quiet, while rice prices in the sales areas remained basically stable in June, with no obvious rises or falls.
Monitoring showed that at the end of June, the wholesale price of northeast round-grain rice in the Beijing market was 4460-4640 yuan/ton, and the wholesale price of long-grain rice was around 5000 yuan/ton; in the Shanghai market, the wholesale price of high-quality Jiangsu japonica rice was 4500-4520 yuan/ton, and the wholesale price of northeast rice was 4840-5000 yuan/ton, basically flat with the previous month.
II. Analysis of Influencing Factors
1. Market-support rice auctions: Heilongjiang auction subsidies doubled but had little effect; middle indica rice auctions were the most eye-catching
In June, as primary and secondary school holidays arrived, summer temperatures rose, and strong rainfall occurred in the south, domestic rice consumption further entered the off-season, and rice mill operating rates continued to decline in some areas. Among them, more than 90% of rice processing enterprises in Jilin had stopped work. Although the subsidy for large-scale rice processing enterprises in Heilongjiang with an annual processing capacity of 100,000 tons or more was raised from 100 yuan/ton to 200 yuan/ton, it was still a drop in the bucket for the temporary storage auction market (previously, on April 27, the Heilongjiang Grain Bureau gave local large-scale grain processing enterprises a subsidy of 100 yuan/ton).
From the transaction situation, after early indica rice traded 535 tons on June 2, it continued to fail to sell in June, and since last autumn had cumulatively traded 708,000 tons; middle indica rice had the best transactions, and the grain source years transitioned from 2013 to 2014, with the latter more favored. In June, a cumulative 416,000 tons traded (last month only 21,000 tons of 2013 grain sources were sold), and the average transaction price reached above 2800 yuan/ton, 100 yuan/ton higher than 2013 grain sources. Since the beginning of this year, a cumulative 1.22 million tons have traded; the transaction rate for japonica rice auctions consistently remained at around 5%, with an average transaction price of 3160-3180 yuan/ton. Grain sources from 2013 and 2014 were more favored, with a cumulative 296,000 tons traded during the month, lower than 310,000 tons last month, and a cumulative 1.29 million tons traded since the beginning of this year.
2. Imports: China's rice imports continued to climb, and Southeast Asian rice prices ran weakly
According to customs statistics, in May China's rice imports continued to climb sharply, but the price spread between Guangdong early indica rice and imported Vietnamese rice remained at around 1100 yuan/ton.
At the same time, as Southeast Asian countries entered the rice planting season, this was especially noteworthy given that El Nino weather this year could cause drought in Southeast Asia:
The Thai government has already advised farmers in the central region to further postpone rice planting from the originally scheduled July to August, because 22 of 76 provinces are still in drought. Thailand's Office of Agricultural Economics said domestic rice prices are expected to rise 10%, to 8500 baht per ton, about 253 US dollars per ton, because El Nino may cause main-season rice supply to decline.
India: In June, the expected decrease in mid-season monsoon rain did not occur, but as July entered the critical period for rice growth, meteorological experts said weak monsoon rainfall could severely affect rice yield potential, especially in India's central, northwestern, and southern rice-producing areas.
Of course, for China, rice trade with Southeast Asia still has not stopped. Among this, according to the memorandum of understanding signed between China and Thailand in April 2014, the Thai government is expected to complete the shipment of 1 million tons of rice to China by August 2015. At the same time, because China and Myanmar signed border trade in rice, the amount of rice exported by that country to China through the border will also increase substantially.
3. China's rice planting and growth conditions in 2015/16: strong rainfall in the south requires vigilance
In mid-June, the National Bureau of Statistics estimated that in 2015 China's rice planting area would increase by 0.2% over the previous year, reaching 30.37 million hectares. Among this, this year's early rice planting area was flat with the previous year, at around 5.8 million hectares.
As of the end of June, most early rice production areas were in the heading and flowering to grain-filling stage, some areas of South China and parts of Jiangnan were in the milk-ripe stage; most of Hainan had already been harvested. Because starting in mid-to-late June, among China's double-season rice production areas, except for Guangdong, where precipitation was relatively low at 63% of normal, precipitation in other major producing provinces was substantially above normal. At this time, southern early rice was in the heading and flowering stage, and continuous overcast rain and heavy rain may make pollination difficult, multiply the empty-shell rate, and lead to a lower seed-setting rate, possibly causing adverse effects on yield. In early July, Jiangxi and other places will take the lead in harvesting, which will reveal the outcome.
For single-season rice, the northeast region, Jianghan, and western Jianghuai were in the tillering stage; eastern Jianghuai and eastern Jiangnan were in the three-leaf to transplanting-and-greening stage, with some areas already tillering; most of the southwest was in the tillering and jointing stage, with some areas in the booting and heading stage, and the weather was favorable.
Looking ahead to July, under conditions of off-season domestic demand, southern early indica rice about to come onto the market, but with the minimum market-support policy still in place, it will still be difficult for the market to see major fluctuations. For domestic rice-producing areas in the sowing and growing period, attention needs to be paid to the impact of weather on rice yields, especially the need to prevent the adverse effects on rice production of periodic low temperatures in northern northeast China, rainstorms and floods in southern Jianghuai and east-central Jiangnan, periodic high temperatures in south-central southwest China and western South China, and typhoons in coastal areas.