2014 indicates supply/demand equilibrium for Mercosur rice sector.
Definitely, the rice business in the Mercosur countries of Argentina, Brazil, Paraguay and Uruguay are no longer what they used to be up to five years ago. Up to that time, we had Argentina and Uruguay producing rice almost exclusively for the Brazilian domestic market.
In spite of being a relevant producer, Brazil had to resort to these neighboring countries to meet their domestic needs. Today’s market has exporters in Uruguay and Argentina giving priority to the demands coming from other commercial partners, while Brazil, now largely self-sufficient, compensates for its rice acquisitions from Paraguay through shipments abroad of at least a million tons.
Since the beginning of this year, exporters in Argentina and Uruguay have been focused on Iraq, Peru and Venezuela, as these markets pay more for their rice. This trend is expected to continue in the years ahead. Sales performance, nonetheless, depends on product availability in the domestic market, requiring an assessment of the impacts of adverse climate conditions on the size of the crop, especially in Uruguay. Rice production in Paraguay continues to increase due to excellent growing conditions and lower production costs than neighboring countries and has become a more regional factor.
Productive Sector Challenges Estimate
In Brazil, the official estimate of a 6.6- percent bigger crop, approximately 12.6 million tons, has been challenged by the productive sector which, also because of climate-induced problems experienced during the growing season, does not believe in a crop bigger than 12.3 million tons.
For this year, the trend is for a continuity of the balanced relation between offer and demand, with average prices slightly higher than in the previous year. As it is a year of presidential elections, it is normal to expect stricter government control over our “basic food basket” product prices. There are no projections for any valuation or devaluation move that could justify government intervention.
International Market Place Conditions
Still in its fledgling stage as an exporter player, Brazil has not yet consolidated an exporter identity, and its performance is still vulnerable to the whims of the international market. Exports have been changing from broken kernels to white rice, parboiled or paddy rice.
With Venezuela and Cuba as major destinations, Brazilian rice exports amounted to 1.2 million tons which, although down 18 percent from the previous period, were enough to outstrip our rice imports by 235.5 thousand tons. The average price practiced this year was R$34.14/sack or US$314.50/ton (index ESALQ/BBMBVMF), up 4.5 percent from the previous year. The large import market in Mexico is definitely on the radar screen. This year, Brazilian exporters will have difficulty repeating past years’ performance, but should ship abroad a volume close to one million tons. Basically three factors reduce the competitive conditions of Brazilian rice in the international market place.
Contrary to what has usually happened, the domestic market presents steady prices even during harvest time, because farmers are not delivering rice and are earning income from their soybean negotiations. The exchange rate scenario is unfavorable, contracting expectations expressed by specialists. In the past 45 years, the dollar suffered four-percent devaluation against the real. Finally, shipping operations in the main port in the South (where rice is produced/ industrialized) are extremely limited, and the entire structure is devoted to soybean exports. An important detail should not be overlooked. This year, we will have presidential elections in Brazil, which always influences the agricultural sector of our country.