Author: Michael Deliberto

In the international rice arena, much of the attention has been focused on the Indian Government’s July 2023 decision to ban non-basmati white rice exports. This is significant to the global rice market as India is the world’s largest rice exporter. The USDA reports India’s 2022-2023 marketing year share of total global rice exports at 40%, as shown in Figure 1 (USDA ERS, FAS, 2023). India has dominated the international market for some time due to low domestic prices and high stocks – resulting from a bevy of trade-distorting subsidies – which allows India to offer rice at substantially lower prices to international buyers. Almost half of India’s exports are non-basmati parboiled rice, with the ban affecting approximately 15% of global rice trade. 

The decision by India to ban rice exports was a means of countering rising food inflation and ensuring sufficient domestic supplies heading into an election year. Also factoring into the government’s decision were uncertain weather conditions attributed to El Niño (warming conditions and potential drought). Indian rice stocks remain plentiful, due in part to their much-scrutinized subsidization policy for rice.  The non-basmati rice ban has not been the only policy action on rice taken by India over the last year.  In September 2022, India banned exports of broken kernel rice and placed 20% tariffs on rough rice, brown rice, and regular milled white rice.  In August 2023, a 20% tariff was placed on parboiled rice exports through mid-October and a $1,200 per ton minimum export price was placed on basmati rice. 

The Indian government has insulated Indian rice farmers from falling domestic rice prices. It sets market support prices and subsidizes crop inputs like fuel, fertilizer, and water to support farmer incomes and lower food prices. In April 2023, a consortium of grain exporting countries, including the U.S., filed a second counter notification at the World Trade Organization, formally challenging India for obscuring the true level of price supports and subsidies it provides for its wheat and rice producers (USA Rice, 2023).

While policy decisions by the Indian government have had an impact on global rice prices, the question remains: Will U.S. rice prices see support from this policy-induced market shock? The short answer is ‘not immediately – but opportunity might exist later in the year.’ 

Global rice prices can support the domestic market to a certain degree as a result of trade flows of both Indian and U.S. rice. Rice exports from India are primarily destined for African countries (e.g., Benin, Senegal, Kenya, Togo, Guinea, and the Ivory Coast). These countries predominantly import broken rice, which is much cheaper than milled rice. In addition, the Philippines, Malaysia, and Vietnam are also reliant on Indian rice exports. Whereas, for the U.S., major rice markets include Mexico, Canada, Haiti, and Latin America. Mexico is primarily a buyer of U.S. rough rice. The Middle East is a region that imports from both the U.S. and India. However, sales to the Middle East – while important – are not ‘core’ markets for U.S. rice. 

The USDA FAS reports that Thai, Vietnamese, and Pakistani export rice prices have increased (Figure 2) because of the Indian ban as countries begin to cover their needs, raising concerns that other countries will also restrict or ban exports (notably, Myanmar recently announced that it was temporarily restricting exports). Thai export prices had risen rapidly from late July through mid-August, peaking at about $650 per ton. Currently, Thai prices are quoted at $595 per ton. Like Thailand, Vietnamese export prices rose quickly but have since retreated to $616 per ton. Asian buyers are holding off from making purchases in hopes that prices continue to fall. U.S. rice export prices for No. 2 4% broken long grain milled rice remain quoted at $760 per ton, unchanged since late January and the highest since October 2008. U.S. quotes for Latin American markets were also unchanged since late January at $725 per ton. Indian price quotes have been unavailable since the start of the export ban which came into effect on July 20^th. Prior to the ban, India rice was quoted around $450 per ton.

Expectations of a significant increase in U.S. rice supplies has helped keep U.S. rice prices stable. However, the export ban in India ultimately will benefit U.S. rice producers in the short run with stronger U.S. export demand likely developing in the Middle East (e.g., Iraq). U.S. rice may also be able to secure additional exports into the Caribbean and Central and South American markets which will contribute to capturing lost market share. U.S. rough rice sales to other Latin American markets are expected to increase in 2023/24. In the previous marketing year, the U.S. saw significant erosion of its market share in Mexico to South American suppliers, mostly Brazil, due to their more competitive prices. Long term, high global prices will increase global rice production. Growing stockpiles of rice in India – compounded by India’s extensive use of trade-distorting subsidies – will ultimately be dumped on the world market, thus causing world rice prices to over-correct (CoBank, 2023).

Figure 1. Global Rice Exports, by Country Share (%), USDA FAS. 

Figure 2. Weekly FOB Export Quotes ($/ton) for Long Grain Milled Rice, USDA FAS. 

References

CoBank. “India’s Rice Export Ban: Short-Term Benefit, Long-Term Challenge for U.S. Rice”. August 17, 2023. 

USA Rice Federation. “India’s Rice Subsidies Under Fire at WTO by U.S., Thailand, and Others”. USA Rice Daily, April 6, 2023. 

USDA Economic Research Service (ERS). “Rice Outlook”, September 2023. https://www.ers.usda.gov/webdocs/outlooks/107418/rcs-23h.pdf?v=8325.4  Date Accessed: September 14, 2023. 

USDA Foreign Agricultural Service (FAS). PSD Online.  https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery Date Accessed: September 25, 2023.

Deliberto, Michael. “How Market Dynamics Separate World and U.S. Rice Export Prices.” Southern Ag Today 3(44.1). October 30, 2023. Permalink

The price of domestic raw cane sugar and the price of refined beet sugar both have direct implications for current United States (U.S.) sugar policy. Nearby futures settlement prices for raw cane sugar and a price range for wholesale Midwest refined beet sugar (free on board factory as quoted each week in Milling and Baking News) are considered the two primary mechanisms to evaluate sugar market dynamics. Figure 1 depicts monthly per pound sugar prices, which as of April 2022 were 42.00 cents for beet sugar and 36.66 cents for raw sugar. According to USDA Economic Research Service (ERS) data, the U.S. wholesale beet sugar price has ranged since 2008 between a low annual average of 28.84 cents a pound in 2012/13 and a high annual average of 55.81 cents a pound in 2010/11 (October-September fiscal year). Furthermore, the USDA ERS reports that U.S. raw sugar price has similarly ranged from a low annual average of 21.00 cents a pound in 2012/13 to a high annual average of 38.46 cents a pound in 2010/11. 

Figure 1. U.S. Refined Beet Sugar and Raw Sugar Prices (cents per pound), 2008-2022. 

Both U.S. beet sugar and raw cane sugar prices rose significantly from 2009 to 2012. A combination of tight domestic sugar supplies and announcements that the USDA would not allow for an increase in sugar imports prior to the end of the marketing year resulted in the raw sugar price in FY 2010 increasing 74% and the refined beet sugar price increasing by 50%. These price increases in the U.S. market occurred simultaneously as world sugar prices began to increase three-fold. The major sugar-exporting countries of India and Brazil reduced global supplies as adverse weather and prices for biofuels reduced exportable surplus in each country. Since U.S. sugar refiners import sugar under obligations of the sugar program, refiners had to compete against these higher prices that foreign supplies were receiving in the world market, hence increasing the domestic price paid to entice imports. However, the world sugar price fell from 30 cents per pound in 2011 to 23 cents in 2012 and then to 18 cents in 2013, lowering any supportive impact on U.S. sugar prices. 

For the period 2008-2014, sugar imports from Mexico enjoyed virtually unhindered access to the U.S. domestic market via NAFTA. At its peak in 2013, sugar imports from Mexico came in over 2 million STRV, accounting for 66 percent of total U.S. imports for sugar. Consequently, increases in the amount of U.S. raw sugar supplies caused domestic raw sugar prices to decline. As a result of Mexico’s increased raw sugar shipments, sugar producers in the U.S. filed an anti-dumping and countervailing duty case of injury with both the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) in March 2014. According to ITC findings, there was determination that the U.S. sugar industry had sustained significant economic injury from Mexico’s action.  With the ITC’s findings, both the U.S. and Mexico entered into a suspension agreement with the key constraint of limiting the supply of imported sugar from Mexico. Additionally, terms were put in place specifying both minimum price and maximum quantity requirements on Mexican sugar destined for the U.S. market.  

Another issue of concern for the domestic sugar industry arose in 2016 when legislation was proposed that would require the display of genetically engineered ingredients on food labels. Perception from this proposed legislation induced an excess in beet sugar supply relative to the supply of cane sugar. This scenario brought about a contraction in the price spread between cane and beet sugar. With the ensuing price contraction for beet sugar, the sugar industry took advantage of large inventories in beet sugar as shown in Figure 2. With passage of legislation establishing national labeling guidelines for food products containing GMO ingredients, beet sugar deliveries began to increase thus drawing down extant beet sugar supplies to such an extent that by 2018 the historical margin between U.S. beet and cane sugar had been reestablished.  

Figure 2. U.S. Sugar Inventories, by source. 

Of the major events impacting domestic U.S. sugar prices, adverse weather events in October of 2019 played a significant role when flooding disrupted both the planting and harvesting of sugar beets. This disruption induced both a sudden and precipitous drop in U.S. beet sugar production, forcing many processors to declare force majeure. These actions caused refined beet sugars to increase by 26 percent per pound (35 cents per pound to 44 cents per pound) from September to November 2019. With improved crop conditions in FY 2021, prices retreated to settle around 36.5 cents per pound.

In comparison with other major agricultural commodity markets, domestic policies for world major sugar producers are more prevalent and play a greater role than is the case for other agricultural commodities. Since there is a greater level of variation in sugar policy from country to country, the retail price of sugar reflects this in the world futures contract price. According to USDA data, from 2009 to 2017, the average monthly world price for raw sugar averaged 19.23 cents per pound. For the period 2009 to 2017, sugar prices have experienced a fair amount of volatility ranging from a low of 13.42 cents per pound in 2015 to a period high of 28.42 cents per pound in 2011. Figure 3 illustrates the imported price that refiners in the U.S. paid for foreign raw sugar (including freight costs). In essence, when the import tariff on raw sugar (to include freight) is coupled with the world raw price, a price ceiling is established on the U.S. raw market. From Figure 3, the U.S. raw price (blue line) has approached the foreign landed price (grey line) as increases in the world raw price track appreciation in the domestic market. 

Figure 3. Raw Sugar Prices (U.S. futures, World futures, and World futures sugar imported into U.S.)

Deliberto, Michael. “U.S. Sugar Policy and Prices“. Southern Ag Today 2(31.1). July 25, 2022. Permalink