Monthly Archives: April 2015

How Rice Tariffs May Force Colombian Central Bank to Raise Rates

In a country where many people have rice for breakfast, lunch and dinner, Colombia’s protection of its rice farmers is miring many in poverty, according to former central bank co-director Leonardo Villar. It is also creating a headache for his successors at the bank.
Import barriers have enabled prices to soar to more than double world levels, helping push inflation to a six-year high and adding to pressure for steeper interest rates, said Villar, head of Fedesarrollo, a Bogota-based economics research group, who served on the central bank board from 1997 to 2009.
“If we persist with this excessive protectionism, and prices of rice and other foods aren’t allowed to correct downwards as they should, the price increases could become incorporated in expectations,” Villar said in a phone interview. “That could force an adjustment in the interest rate from the bank.”
Annual inflation reached its fastest pace since 2009 in March, led by a 37 percent jump in the cost of rice after farmers planted less last year amid forecasts of unfavorable weather. Central bank co-directors Ana Fernanda Maiguashca, Adolfo Meisel and Carlos Gustavo Cano have all signaled over the past month that they would consider raising interest rates if inflation expectations become “unanchored” from the 3 percent target.
With inflationary pressure mounting even as economic growth slows, Finance Minister Mauricio Cardenas says he is sympathetic to calls to ease import restrictions on rice.
Price ‘Fluctuations’
“With the price increases we’ve seen in the last few months, the sentiment we’ve seen in Colombia is that we need more competition,” Cardenas said in an April 19 interview in Washington. “We need more flexibility in terms of making sure that whenever these pressures emerge, we are ready to import to prevent such fluctuations in prices.”
Rafael Hernandez, head of the National Federation of Rice Growers, or Fedearroz, described Fedesarrollo’s analysis as “economists’ tales, but not reality.” It is unrealistic to speak of free trade when producers such as the U.S., Thailand and Vietnam subsidize their rice growers, he said.
“For the country to become competitive, and for the farmer to become more competitive, they require protection and state policies to improve competitiveness,” Hernandez said in an April 9 interview in his Bogota office. “To speak of a free market, when products are coming here with massive subsidies, to compete with poor farmers who don’t have enough support, that doesn’t seem to me to be just.”
‘Monumental’ Harvest
The U.S. is allowed to export a quota of about 90,000 metric tons of rice to Colombia this year, with this figure increasing by 4.5 percent annually. Above that amount, exports pay a duty of 80 percent.
Annual inflation accelerated to 4.56 percent in March, above the limit of the central bank’s target range of 2 percent to 4 percent. With its large weighting in the consumer basket, rice contributed more than any other product to the jump. Policy makers have repeatedly forecast that inflation will start to slow in the second half of the year.
The central bank left its policy rate unchanged at 4.5 percent at its board meeting April 24, as forecast by all of the 33 analysts surveyed by Bloomberg.
The pressure on inflation from rice prices may be about to ease. Cano, a former agriculture minister, said April 13 that a “monumental” harvest will cause rice prices to fall in July, August and September.
Inflation Expectations
Still, inflation expectations for 2016 rose for a second straight month in April, to 3.2 percent, in the central bank’s monthly survey of economists. Policy makers try to keep expected price increases “anchored” close to the inflation target, since these play a role in price-setting decisions and wage negotiations.
Rice accounts for about 14 percent of the calories consumed by Colombians, according to Fedearroz.
In a 2013 study, Fedesarrollo estimated that eliminating the gap between Colombian and international prices would lift more than 1.2 million people out of poverty, and more than 450,000 out of extreme poverty.
The “poverty line,” calculated using the consumer price index for low-income families, is about $80 per month.
A ton of white rice cost about 2.78 million pesos ($1,130) in Colombia in March, compared with $485 for a ton of rice in the U.S., according to data collected by Fedearroz.
“If rice in Colombia were at international prices, the levels of poverty would fall significantly, basically because it has such an important role in the family consumption basket,” Villar said.
Villar is a leading candidate to be Colombia’s next central bank chief after Governor Jose Dario Uribe leaves office at the end of next year, according to Munir Jalil, head analyst at Citigroup Inc.’s Colombia unit.

Vietnam Plans to Build Thermal Power Plants Using Rice Husk

Rice HQ

Vietnam is planning to build 20 thermal power plants using rice husk as part of efforts to convert rice wastes (such as rich husks, sawdust and bagasse) into sources of clean energy, according to local sources.

The government will build thermal power plants in Mekong River Delta (MRD)’s five provinces – An Giang, Kien Giang, Hau Giang, Dong Thap and Can Tho – with a total capacity of 200 megawatts. These plants are expected to use 200 tons of rice husk everyday and the waste generated by the plants will be used in the making of high-quality cement and electrically insulated materials.

The government has started the construction of the first thermal rice husk-run power plant, costing about $31 million, on a 9-hectare land plot in Long My District of the southern province of Hau Giang.

Scientists have been for a long time stressing to build rice-husk power plants in MRD, which is the largest rice growing region in the country and generates nearly 5 million tons of rice husk annually, as huge quantities of rice husk are burnt or left into canals and rivers causing environmental pollution.

They say if Vietnam uses its agricultural wastes effectively, it can save hugely on producing fossil fuels, create several jobs for locals and ensure national power security.

India’s Basmati Rice exports edge down to 3.78 mn tons in FY15

ndia’s total rice exports, including basmati and non basmati, during 2014-15 financial year reached 11.65 million tons, advanced 8% from around 10.78 million tons exported during the same period in FY 2013-14, Bloomberg reported citing latest data from the All India Rice Exporters Association (AIREA).

Exports of basmati rice from India declined slightly to around 3.78 million tons in FY 2014-15 from around 3.76 million tons exported during FY 2013-14.

Non basmati rice exports rose to 7.87 million tons in FY 2014-15, advanced 12% from around 7 million tons recorded in FY 2013-14.

Vietnam Cuts Floor Price of Lower Quality Rice Exports

Rice HQ

The Vietnam Food Association (VFA) has cut the floor price (minimum export price) of the lower quality 25% broken rice exports to around $340 per month, down about 3% from around $350 per ton due to subdued demand for Vietnamese rice, according to Reuters. The new floor price will be effective from April 30, 2015, Reuters quoted a statement from the Vietnam Food Association (VFA).

Vietnam had cut the export floor price of lower quality 25% broken rice variety to $350 per ton from about $360 per ton in March 2015.

The South-East Asian nation has decided to retain the export floor prices of higher quality and medium quality rice such as 5%, 10% and 15% broken rice varieties at their current levels at around $385 per ton, $375 per ton and $365 per ton respectively.

Earlier, traders told media sources that the recently struck deals to supply 240,000 tons to Malaysia and 300,000 tons to the Philippines have not been helpful to hold the prices steady. Businesses have also successfully purchased one million tons of rice between March 1 – April 15, 2015 under the government-backed plan to control price falls. However the program seems to have not got the desired effect.

Export prices of 5% broken rice, 15% broken rice and 25% broken rice varieties declined to around $360 per ton, $345 per ton and $335 per ton respectively from around $385 per ton, $370 per ton and $355 per ton from the beginning of this year.

Vietnam exported about 1.144 million tons of rice in January 1 – April 13, 2015, down about 35% from about 1.76 million tons of rice exported in first four months of 2014, according to data from the VFA.

Rice exports grow

Rice exports are set to leap by more than 10 percent this year, setting a new record, industry experts said yesterday. U Soe Tun, associate secretary of the Myanmar Rice Federation (MRF), said total exports would reach 2 million metric tonnes in 2015-2016.

The surge is due to a deal regularising exports to China, as well as the emergence of the United States as a buyer of Myanmar rice, he said.

“Being able to export rice to the USA is a significant improvement, even though the amount is small. We expect the volume to rise so long as we can maintain the quality,” he said.

Last year, 1.39 million metric tonnes of rice was exported, plus more than 400,000 tonnes of broken rice, earning US$644 million – a 40-year record, overtaking the 1.46 million tonnes sold in 2012-13 fiscal year.

Myanmar now serves 64 international rice buyers, including the United States, which last year bought 17 tonnes of high-quality pawsan, export figures stated.

The agreement with China to export 100,000 tonnes is planned to start with a 3000-tonne consignment in May.

However, U Ye Min Aung, general secretary of the MRF, says much still has to be done to improve export quality and price control. “The government has to cut logistics costs in order to control the price of exported goods,” he said.

Though its economy depends heavily on rice exports, Myanmar still ranks relatively low among Asia’s rice exporters.

India Exports Increase 8% y/y to 11.65 Million Tons in FY 2014-15, Says AIREA

Rice HQ

India exported around 11.65 million tons of rice (including basmati and non-basmati) in the FY 2014-15 (April – March), up about 8% from around 10.78 million tons exported during the same period in FY 2013-14, Bloomberg quoted All India Rice Exporters Association (AIREA).

India’s basmati rice exports have increased slightly to around 3.78 million tons in FY 2014-15 from around 3.76 million tons exported during the same period in FY 2013-14. India’s basmati rice exports were primarily impacted due to Iran’s ban on rice imports since November 2014. India exported around 900,000 tons of rice to Iran in FY 2014-15, down about 36% from around 1.4 million tons exported last year, according to the AIREA. Saudi Arabia, UAE, Iraq, Kuwait remained the other top importers of Indian basmati rice.

India’s non-basmati rice exports increased to around 7.87 million tons, up about 12% from around 7 million tons recorded in the same period in FY 2013-14. African countries were the top importers of India’s non-basmati rice.

Pakistan rice imports frustrate farmers

IN Kilombero District, hundreds of kilometres from East African Community headquarters in Arusha, smallholder rice farmers are still struggling to sell their rice from 2012/13 season.

“Prices are still very low but have slightly appreciated from 600/- to 750/- a kilogramme on average,” said Ms Christina Magwila.

The mother of four said prices plummeted by more than 50 per cent last year when Kilombero Plantation Limited, the single largest client of her rice, failed to buy the commodity from over 5,000 smallholder farmers due to saturated local market.

“I sold my rice at a loss because I needed school fees for my two secondary school girls and their primary school sibling,” said Ms Magwila who like many other smallholder rice farmers in the country, is struggling to absorb the huge loss caused.

KPL Chief Executive Officer, Mr Carter Coleman said his company posted a whopping 4bn/- loss as a result of the Pakistan rice imports in 2013 and a similar amount due to a 25 per cent price fall caused by a bumper harvest in 2013/14 season.

“Some 40,000 tonnes of cheap Pakistani rice that was exempt from the Common External Tariff of the East African Community was imported, dropping the wholesale price by 54 per cent and impoverishing hundreds of thousands of rice smallholders,” Mr Coleman said while responding in an interview.

The government had initially issued permits for the importation of 120,000 tonnes of rice to offset an alleged shortage in the local market but suspended the imports in March last year after an outcry by commercial and smallholder rice farmers.

KPL still had 1,000 tonnes of rice from the 2012 season and another 5,000 tonnes from 2013 season which could not be sold at a profitable price due to the cheap imports by mid last year.

Local rice producers further faced problems to export the grain to Rwanda and Uganda because crooked traders blended local rice with Pakistan imports forcing governments of the two countries to slap a 75 per cent import duty. Coleman is angry with Ugandan authorities for continuing to impose the 75 per cent duty on Tanzanian rice exports contrary to EAC’s Customs Union Protocol.

“There is no substantial Pakistani rice in Tanzania, please get your government to lift the tariff on our rice as you are bankrupting Tanzanian farmers,” said Coleman in an emotional message directed at former Ugandan Ambassador to China, Philip Idro.

In his response, Ambassador Idro argued that so long as local rice was blended with Pakistan rice, it will continue attracting hiked duty because it violates the rules of origin as per EAC Customs Protocol. “This means that we have to do our part and that is why Uganda is going ahead to hold onto the 75 per cent tax, even if alone,” Ambassador Idro stressed.

He warned that local rice producers who create jobs and add value to the economy should regularly update policy makers on the disaster which imported rice is causing on the EAC region’s economies.

But the jinx of Pakistan rice imports does not only seem to haunt local farmers, but also their peers in Kenya where the government has a bilateral agreement with Pakistan to swap tea and rice trading.

Last week, a delegation of East African Farmers Federation led by its President Philip Kiriro, visited East Africa Cooperation Minister, Dr Harrison Mwakyembe and raised the issue of Pakistan rice imports frustrating regional trade. EAFF Chief Executive Officer, Stephen Muchiri said Kenyan rice farmers are failing to exploit the EAC Customs Union Protocol because their commodity to Rwanda and Uganda is slapped with a 75 percent duty.

“You know Kenya has a trade agreement with Pakistan whereby they buy tea while we import their rice. Unscrupulous businessmen are mixing the Pakistan rice with local rice in Kenya which has attracted a 75 per cent import duty in Uganda and Rwanda,” Mr Muchiri said.

“I understand this problem has also affected rice farmers here, I hope that you as Chairman of the Council of Ministers can help us address this,” he pointed out saying EAFF is working with United States Agency for International Development in assisting farmers acquire skills, identify markets and observe quality and standards.

Currently after investing heavily in rice production, local farmers produce over 1.2 million metric tons of the commodity against annual demand of less than one million tonnes.

Responding to the EAFF delegation’s request, Dr Mwakyembe said he will raise the matter with his peers during the next Council of Ministers meeting scheduled for Thursday, April 3. “Much of this rice is smuggled into our region, we should find a solution against this,” said Dr Mwakyembe.

He pointed out that EAC’s biggest trading prowess lies in agriculture produce which involves the majority of people in the region hence the need to protect the market for such commodities. Dr Mwakyembe invited EAFF officials to make their presentation before an EAC Council of Ministers which will thereafter deliberate on the matter.

Earlier this year, EAC Finance Ministers agreed a 35 per cent Common External Tariff (CET) on imported rice for the region, a move which has strongly been opposed by rice farmers and former Minister for Agriculture, Food Security and Cooperatives Minister, Christopher Chiza.

“I was not consulted on this issue which is detrimental to our farmers,” Engineer Chiza said promising to strongly oppose the attempt. He said Kenya which includes Pakistan rice on its list of sensitive products, imposes a 35 per cent duty hence wants the whole block to adopt the rate.

“My fear is that Kenyan rice imports with a lower rate will continue be smuggled into Tanzania,” Eng Chiza who has since been shifted to Prime Minister’s Office, warned. Finance Minister, Saada Mkuya Salum said the CET is negotiable and can be hiked by individual countries if need arises to curb cheap imports.

India Rice Sellers Lower Some of Their Quotes Today; Other Asian Rice Quotes Unchanged

India rice sellers lowered their quotes for 5% broken rice, 100% broken rice and parboiled rice by about $5 per ton each to around $365 – $375 per ton, around $335 – $345 per ton, and around $360 – $370 per ton respectively today; and 25% broken rice by about $10 per ton to around $270 – $280 per ton. Vietnam rice sellers are out today on account of a public holiday. Other Asian rice sellers kept their quotes unchanged from yesterday.

5% Broken Rice

Thailand 5% rice is indicated at around $380 – $390 per ton. India 5% rice is indicated at around $365 – $375 per ton, a $10 per ton discount to Pakistan 5% rice shown at around $375 – $385 per ton.

25% Broken Rice

Thailand 25% rice is shown at around $355 – $365 per ton. India 25% rice is indicated at around $335 – $345, about a $5 per ton premium on Pakistan 25% rice shown at around $330 – $340 per ton.

Parboiled Rice

Thailand parboiled rice is indicated at around $380 – $390 per ton. India parboiled rice is indicated at around $360 – $370 per ton, about a $25 per ton discount to Pakistan parboiled rice shown at around $385 – $395 per ton.

100% Broken Rice

Thailand broken rice, A1 Super, is indicated at around $320 – $330 per ton. India’s 100% broken rice is shown at around $270 – $280 per ton, about a $15 per ton discount to Pakistan broken sortexed rice shown at around $285 – $295 per ton.

China Tightens Control Over Unofficial Rice Imports from Vietnam

Rice HQ

The Chinese authorities have reportedly tightened control over unofficial rice imports from Vietnam, according to local sources.

Unofficial rice trade between the two countries via border gates has been very rampant for many years and traders on both ends buy/sell rice very easily without the need for any agreements. However, the Chinese authorities have closed the border gates.

Local sources say due to the Chinese authorities’ actions, a number of trucks loaded with rice have been queued up at the border gates waiting for the approval of the Chinese authorities. Nearly 30,000 tons of rice is understood to be stuck at border gates and faces risk of decay as it is exposed to all kinds of weather conditions, according to the Ban Quan border guard unit in Lao Cai’s Bao Thang district.

The Vietnamese district heads of concerned border gates are understood to have apprised about the situation to the government. They are also negotiating with the Chinese authorities to open gates in Lung Po, Ban Quan, Na Loc and other places and lift the blockade for Vietnamese rice to enter China.

Despite the government’s discouraging cross-border exports, Vietnamese rice exporters often prefer cross-border exports because of lesser quality checks at the borders. Recently the government had also warned about the risks associated with such exports. The Chinese importers prefer importing rice through borders rather than through official channels to cut costs, according to a local trader. For instance, if they import rice through official channels, they need to pay an extra amount of about $160 per ton, including a quota fee of $80 per ton, VAT and import tax. That means, for Viet 5% rice, which costs $360 per ton will cost importers about $520 per ton.

According to the VFA, last year, while Vietnam exported about 6.3 million tons of rice, nearly 2 million tons, or 30% of total rice exports, had been exported through borders.

United States rice back on retail shelves in UK

In a major victory for the rice industry, U.S. rice has reemerged on mainstream UK retail shelves for the first time since 2006.
The reappearance of U.S. rice in U.K. retail stores comes after years of campaigning and promotional efforts by USA Rice to assure suppliers that U.S.-grown rice is a high quality, competitive crop free of GMO traits. Last October, a USA Rice trade delegation traveled to the UK to meet with major retailers, UK rice importers, millers, and selected wholesalers.
During that successful trip, the team met with USDA Foreign Agricultural Service representatives from London, and Jim Higgiston, the Agricultural Minister Counselor at the United States Mission to the EU.
“We had an excellent and worthwhile dialogue with U.K. importers that has apparently paid off,” said Bastiaan de Zeeuw, president and CEO of Riviana Foods.
For the past several years, U.S. long grain rice in the UK had only been present in the ethnic segment of the market, targeting mainly Chinese, as well as the Afro-Caribbean and Bangladeshi populations, a loyal consumer base who appreciate U.S. long grain’s high quality characteristics.
However, thanks to the continuous joint effort by USA Rice and U.K. importers, U.S. rice can now be enjoyed by a much wider audience.
The umbrella brand carrying U.S. rice, Tolly Boy, is a well-known and trusted brand in the UK market, carrying different high quality rice varieties. The identified U.S. rice brand is available in select Asda stores in 5 kg and 10 kg packaging and its presence in mainstream retail stores has the potential to expand the consumer base substantially, offering higher sales volumes for U.S. long grain rice.
“This is an exciting development for the U.S. rice industry. The U.K. has the potential to grow into a significant market again and perhaps signal our imminent return to the continent as well,” said de Zeeuw.