SESSION 2.

ASEAN and the Global Rice Market Situation and Outlook

Eric Wailes
Distinguished Professor University of Arkansas

Objectives of Session 2.1

Overview of current global and ASEAN rice markets Projections
Methods Key drivers of ASEAN and global rice markets
Macroeconomic environment Policy environment

10-year baseline ASEAN/global rice markets

What the baseline estimates mean for food security concerns for ASEAN members

Significance of ASEAN in World Rice Markets

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

53 29

ROW
21

25

22

18

ASEAN

ASEAN Compared to World Market

Consumption: Only 22% of global consumption but ASEAN average per capita consumption is 165.7 kg compared to the world average of only 66.8 kg. Productivity: 29.2% of rice area harvested and 24.4.% of total production means ASEAN yields of 2.47 mt/ha (milled) are lower than the world average of 2.95 mt/ha.

Separation of Rice Export Prices, USD/mt

700 650 600 550 500 450 400 350 300

US 2/4% Thai 100%B Viet 5% Thai A1 Super

Current Year Rice Market Situation (2012/13 vs. 2011/12)

GLOBAL RICE
Slightly higher output Higher consumption Lower total trade Lower ending stocks Stocks to use ratio Trade to use ratio

% Change

2012/13 level

up 0.5% 469.4 mmt up 2.6% 470.0 mmt down 7.2% 36.5 mmt down 0.3% 105.8 mmt down 2.8% 22.5 down 9.5% 7.8

Current Year Rice Market Situation (2012/13 vs. 2011/12) ASEAN RICE
More Production More Consumption More Exports More Imports More Stocks Stocks to use ratio Exports to production Imports to use

% Change
up 1.5% up 2.4% up 4.6% up 4.9% up 3.1% up 0.7% up 13% up 4%

2012/13 Levels
114.6 mmt 103.1 mmt 16.2 mmt 5.2 mmt 20.0 mmt 19.4 14.1 5.0

Other Key Countries Rice Trade Situation

Net Rice Trade of PLUS 3 Countries +INPK

11/12 Net Exporters People's Republic of China India Pakistan Sum-PLUS3+INPK Net Exports Others World Net Exports PLUS3+INPK % World Share

12/13

% Change

-1,764 10,376 3,440 12,052 20,474 32,526 37.1%

-2,346 8,141 3,524 9,318 21,925 31,243 29.8%

+ 33.0% - 21.5% + 2.4% - 22.7% + 7.1% - 3.9% -7.2

Significant increase in China imports Decline in India exports Modest expansion of Pakistan exports

Net Rice Trade of PLUS 3 Countries +INPK

11/12 Net Importers Japan South Korea Sum-PLUS3+INPK Net Imports Others World Net Imports PLUS3+INPK % World Share

12/13

% Change

435 377 812 31,714 32,526 2.5%

500 601 1,101 30,143 31,243 3.5%

+ 14.9% + 59.3% + 35.5% - 5.0% - 3.9% + 1.0

WTO obligations bind both Japan and South Korea South Korea has imported forward, due to budgetary management, will be offset in 2013/14 projection

Longer Term Projections to 2022/23

Method of generating projections Macroeconomic environment for ASEAN Policy environment for ASEAN ASEAN rice projections to 2022/23

Method of Situation/Outlook Projections and Analysis

Arkansas Global Rice Economic Project (AGREP)
Arkansas Global Rice Model (AGRM) RICEFLOW Model

Outlook is a 10-year period: 2012/13 to 2022/23 Data: USDA, Production Supply Distribution (PSD Online) 2012/13 projections reflect 2012 production marketed in 2013

Method of Situation/Outlook Projections and Analysis

Models are updated regularly Deterministic and Stochastic Projections Deterministic projections based on:
Macroeconomic assumptions from Global Insight Continuation of existing rice sector policies Continuation of existing trade policies or scheduled changes Normal (average) weather/climatic conditions

Method of Situation/Outlook Projections and Analysis

Stochastic projections are based on:
Same macroeconomic and policy assumptions as the deterministic projections But we do not assume average weather conditions For each year, the model is simulated 200 times using variation in production (yields) based on historical variability to give probabilistic estimates of yields correlated spatially and over time This provides confidence intervals (upper and lower 10% probabilities) of the projections

Example of Stochastic vs Deterministic

Key Macroeconomic, Market and Policy Assumptions

GDP Growth Rates

Population Growth Rates

Key Drivers to the Market

1. Re-entry of India as a major rice exporter at 8-9 mmt per year. 2. Thailands paddy pledging program, making it not market competitive. Burdensome stocks means that the government will negotiate increased rice export sales. 3. Emergence of China as a significant rice importer, taking advantage of substantially lower import prices.

 ASEAN rice output increases from 114.6 mmt in 2012/13 to 128.8 mmt by 2022/23. ASEAN market share increases from 24.4% to 25.3% during the same period.

 ASEAN rice consumption increases from 103.0 mmt in 2012/13 to 113.5 mmt by 2022/23. Global market share increases slightly from 21.9% to 22.4% during the same period.

 Thailand regains leading share of global rice trade. Vietnam maintains export level and share. While we project Myanmar and Cambodia to export 1.5 mmt each, this level of exports will require significant export infrastructure development. ASEAN share of global rice exports increases from 51.7% in 2012 to 55.4% in 2022.

Indonesia and the Philippines remain as important net importers Stable imports are projected for Brunei Darussalam, Malaysia, and Singapore Lao PDR moves towards a net exporter position ASEAN share of global imports increases from 16.6% in 2012 to 17.5% in 2022

Peoples Republic of China Rice Trade

(thousand mt)

Key Export Competitors

(thousand mt)

Growing Importance of Africas Imports

Stochastic World Long-Grain Reference Price

Framework provides range of likely price outcomes, 80% probability in the range of USD 360 to USD 500 per metric ton

Stochastic: World Rice Net Trade

Framework provides range of likely trade outcomes, with growth over time, 80% probability in the range of 30 MMT to 43 MMT by 2022.

Key Baseline Questions

What can the baseline provide to help address questions of this Forum? What are the baseline yield gaps to achieve self-sufficiency? Given current baseline assumptions, what are the probabilities of achieving self-sufficiency? If self-sufficiency is achieved by whatever means by ASEAN rice importers, what are the consequences for ASEAN rice exporters?

Baseline Yield Gap to Self-Sufficiency

Milled Rice Yield (mt/ha), Philippines, 2013-2022
4.00 3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Milled Rice Yield (mt/ha), Indonesia, 2013-2022

20.0%
19.5% 19.0% 3.75 3.50 3.25 3.00 9% 8% 7% 6% 5%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

4.00

10%

% of baseline yield

18.5%

18.0%
17.5% 17.0%

GAP

16.5% 16.0%
Baseline Yield
Self-Sufficiency Yield %Yield Increase (right axis)

2.75

Baseline Yield
Self-Sufficiency Yield %Yield Increase (right axis)

Baseline Probability of Self-Sufficiency

1000 MT

1000 500 0 -500 -1000 -1500 -2000 -2500

Stochastic Rice Exports, Philippines, 2013-2022

1000 MT

2000 1000

Stochastic Rice Exports, Indonesia, 2013-2022

10% prob line Self-sufficiency line

0 -1000 -2000 -3000 -4000 -5000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

10th Percentile

Mean

90th Percentile

10th Percentile

Mean

90th Percentile

Baseline Impacts of Philippine and Indonesian Self-Sufficiency

$/MT

World Long Grain Rice International Reference Price

1000 MT

Vietnam Rice Exports

500 450 400 350

8000 7500 7000 6500 6000

300 250
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

5500 5000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Self-sufficiency

Baseline

Self-sufficiency

Baseline

Summary and Conclusions

1. ASEAN remains a critical player in the global rice market
Growing share of world export supplies Key rice exporters (Thailand, Vietnam, Cambodia, and Myanmar) Key rice importers (Indonesia, Malaysia, and Philippines)

2. Baseline projections suggest ample supplies and downward pressure on global rice prices
Long-grain world reference prices will remain in the range of $400 to $500 per metric ton

Summary and Conclusions

3. Baseline can be used to project self-sufficiency yield gaps 18% for Philippines 7% for Indonesia 4. Baseline probabilities of achieving self-sufficiency for Philippines: 10% probability by 2015, 28% by 2022 for Indonesia: 10% probability by 2016, 23% by 2022 5. Baseline estimate of the external costs of pursuing selfsufficiency relative to current projected trade Lower world prices initially by 19% and 9% by 2022 Lower Viet exports, 19% initially and 7% by 2022

For information, contact:

Prof. Eric Wailes

ewailes@uark.edu