HISTORIC MEETING <strong>of</strong> the Board <strong>of</strong> Trustees <strong>of</strong> IRRI, 14 April 1960.From left end <strong>of</strong> table: Chairman J.G. Harrar, Paul C. Ma (hidden),Paul<strong>in</strong>o J. Garcia, Vicente G. S<strong>in</strong>co, Hitoshi Kihara, R.F. Chandler,M.C. Chakrabandhu, Juan de G. Rodriguez, and F.F. Hill. Not shownis K.R. Damle.
Hidden Treasure*The Ch<strong>in</strong>ese New Year has just been celebrated across most<strong>of</strong> Asia as I write this issue’s Hidden Treasure. For many <strong>in</strong>the <strong>in</strong>dustry, this signals a well-deserved “rest”—whichwe are sure is well appreciated. Unfortunately, for those <strong>of</strong> ushere on the other side <strong>of</strong> the ocean, it is a time <strong>of</strong> activity, as theyear ahead is evaluated, as the pieces <strong>of</strong> the supply puzzle fall<strong>in</strong>to place, and as plant<strong>in</strong>gs and future supply across the WesternHemisphere are assessed aga<strong>in</strong>st demand <strong>in</strong> the Americas, tobuild a model for what is left—<strong>in</strong> terms <strong>of</strong> rice exports—to the rest<strong>of</strong> the world.Volatility has <strong>in</strong>creased over the years as the weatherbecomes more unpredictable. This is a serious concern, as mostcountries and bus<strong>in</strong>esses have grown so used to some veryfavorable factors that have resulted <strong>in</strong> strong production forthe past several years. Agrochemicals and new technology (<strong>in</strong>farm<strong>in</strong>g and postharvest) also helped deliver the required outputto meet the grow<strong>in</strong>g population’s needs. Yet, the variability <strong>in</strong> theweather cannot be ignored as it affects the level <strong>of</strong> stocks held bycountries around the world. Several countries are forced to makedecisions with the immediate circumstances <strong>in</strong> m<strong>in</strong>d rather thanplan for longer-term needs. This lack <strong>in</strong> foresight is a critical part<strong>of</strong> the bus<strong>in</strong>ess today that must be watched for its impact on the“psychology” beh<strong>in</strong>d decisions <strong>in</strong> the future.Notably, Vietnam’s massive w<strong>in</strong>ter-spr<strong>in</strong>g crop this year hasdepressed the region’s market. We can’t help but feel that at leastpart <strong>of</strong> this current weakness can be attributed to the fact thatworld rice markets have evolved s<strong>in</strong>ce the “crisis” year <strong>of</strong> 2008—totake on this same near-term focused decision-mak<strong>in</strong>g process thathas ignored some very obvious long-term concerns that plagueproduction.The government <strong>of</strong> Thailand has similar issues—althoughthe Thai rice <strong>in</strong>dustry is more sophisticated <strong>in</strong> terms <strong>of</strong> overallexperience <strong>in</strong> exports and <strong>in</strong> the ambition to be a dependablesupplier to the world—consider<strong>in</strong>g the 5 million metric tons ormore <strong>of</strong> buffer supplies it currently has. The problem, however,is that this huge amount <strong>of</strong> stocks is becom<strong>in</strong>g a real challengeto the government because, if it is sold at current market prices,Thailand will <strong>in</strong>cur massive losses and deal with dire politicalramifications. This will cont<strong>in</strong>ue to be a major issue and a problemfor most rice-produc<strong>in</strong>g (and export<strong>in</strong>g) nations, which grapplewith food security, national issues, and the bus<strong>in</strong>ess impact <strong>of</strong>policy decisions.Moreover, India cont<strong>in</strong>ues to rema<strong>in</strong> a critical variable <strong>in</strong> theyear ahead. A lot <strong>of</strong> “PR” from the Indian government has been<strong>in</strong>dicat<strong>in</strong>g that the country has high stocks <strong>of</strong> wheat and that it<strong>in</strong>tends to use these to fill <strong>in</strong> the gap <strong>in</strong> consumption caused bythe shortfall <strong>in</strong> rice production. Tim<strong>in</strong>g will be the key elementhere as the summer crop plant<strong>in</strong>gs and the monsoon ahead sooncome <strong>in</strong>to focus. While the possibility <strong>of</strong> the government reduc<strong>in</strong>gits stocks to m<strong>in</strong>imize storage expenses is viable, these stock<strong>sr</strong>ema<strong>in</strong> the country’s only <strong>in</strong>surance aga<strong>in</strong>st the risk <strong>of</strong> anotherbad monsoon.Oddly enough, a healthy amount <strong>of</strong> demand is available, but,with new crops com<strong>in</strong>g <strong>in</strong> and augment<strong>in</strong>g supplies at severalmajor rice orig<strong>in</strong>s, thisfactor has largely beenoverlooked by themarket. The U.S. marketforecasts <strong>in</strong>creasedproduction for 2010-11. But, as I travelright now <strong>in</strong> Arkansas,Missouri, and Texas, I am rem<strong>in</strong>ded that the weather once aga<strong>in</strong>needs to be monitored closely as the new plant<strong>in</strong>g seasonapproaches. The question now is whether or not the expecteddemand will outweigh this concern. Adverse weather over thepast 6 months has already caused a 10–15% reduction <strong>in</strong> supplies.Furthermore, Brazil cont<strong>in</strong>ues to headl<strong>in</strong>e weather-related yieldlosses. Uruguay and Argent<strong>in</strong>a have also been affected. Many feelthat the decreased export volumes from these two countries willbe comb<strong>in</strong>ed to meet local demand (especially from Brazil), andstocks from the U.S. and Asia will likely be required to fill <strong>in</strong> thegaps. Markets are constantly <strong>in</strong> motion and, at present, I feel thatthe market has not yet fully <strong>in</strong>tegrated these substantial losses<strong>in</strong>to the equation. Especially with a more short-term decisionprocess, many <strong>of</strong> the longer-term prospects will likely be factored<strong>in</strong> only when they become a reality. Skepticism cont<strong>in</strong>ues toabound as the massive Vietnamese (and Thai) crops arrive.Contrary to what is happen<strong>in</strong>g <strong>in</strong> Asia, the medium-<strong>gra<strong>in</strong></strong>markets have seen U.S. exports already ahead by 25% comparedto last year. This shows the level <strong>of</strong> demand that this marketis receiv<strong>in</strong>g and also the shifts <strong>in</strong> demand that global marketscont<strong>in</strong>ue to digest. Without an Australian availability, no freshsupplies are expected until October, as there is a fundamentalshift <strong>in</strong> the way demand reveals itself to leave its mark on the pricemechanism. Turkey’s recent purchase <strong>of</strong> 200 thousand metric tonsdur<strong>in</strong>g the first quarter is just one example <strong>of</strong> how demand arrivesand how swiftly markets react on the realization <strong>of</strong> the news.The dollar situation and currency market moves are alsocrucial elements to watch: the Asian currencies, the euro, and thedollar that rema<strong>in</strong>s weighed down by the pressure <strong>of</strong> the U.S. debtand Ch<strong>in</strong>a’s rise <strong>in</strong> the global village.As we cont<strong>in</strong>ue to watch the people who make “the market”and ga<strong>in</strong> some understand<strong>in</strong>g about the future, we would like to<strong>in</strong>vite everyone to “The Rice Trader Americas Conference 2010” <strong>in</strong>Cartagena, Colombia, on 20-22 April 2010. An excellent panel <strong>of</strong>speakers will provide <strong>in</strong>sights <strong>in</strong>to rice <strong>in</strong>dustry developments andthe road ahead. We have also arranged several social gather<strong>in</strong>gs(<strong>in</strong>clud<strong>in</strong>g our great boat event). We hope to <strong>of</strong>fer an excellentopportunity for all to network and build the <strong>in</strong>telligence neededfor future bus<strong>in</strong>ess decisions.Jeremy Zw<strong>in</strong>gerPublisher* The op<strong>in</strong>ions expressed here are those <strong>of</strong> the author and do not Rice necessarily Today reflect April-June the 2010 views <strong>of</strong> the International Rice Research Institute.5
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