Brazil Rice annual report

Production: Rio Grande do Sul, in the South Region, is the major rice producing state in the country, generally accounting for half of Brazil‟s entire crop. However, as is the case with corn, some rice is produced in every state in Brazil. Brazil produces mainly long grain rice under irrigation and also dryland conditions. Nearly fifty percent of rice produced in Brazil is irrigated rice, with 90 percent of all irrigated rice production in Rio Grande do Sul. The South continues to shift from dryland to irrigated production. Yields in irrigated areas are generally high at more than 6 kilograms per hectare. Conversely, production in the Center-West and Northeast is usually dryland cultivated with much lower yields. Center-West rice area has not grown as many had predicted. With the massive expansion of soybean and corn cropland in the region, it was thought that rice would also expand as it is often used as a precursor crop and occasionally in rotation with soybeans. However, such expansion has not occurred on the scale many had predicted and in fact, the area under cultivation has fallen from 900,000 hectares in 2003/04 to 356,000 hectares in 2009/10. In 2009/10 the Center-West fell from the second largest planted region to the fourth behind the South, Northeast and North. The Northeast is comprised of many small producers that rely on hand labor and use few inputs, and therefore yields are only one third of those on the Southern lands. Planting runs from September through November and harvest runs from the following February through April. The local marketing year runs from March to February. Page 17 Post estimates that Brazil will produce a smaller rice crop this year at 7.85 million tons (milled basis) or 11.5 million tons of rough production. Imports are estimated at 1 mmt or double last year‟s 500,000 tons. In Rio Grande do Sul, excess rain caused replanting outside the recommended period. Throughout the state, there were an estimated 1.084 million hectares planted but only an estimated 1.031 million hectares will be harvested. There are also continuing concerns that moisture and high temperatures may increase the possibility of disease outbreaks that could damage the quality of the crop. Outlook 2010/11: Production Post forecasts rice area planted in 2010/11 at 2.8 million hectares, the same level as 2009/10. Rice production is forecast at 12.2 mmt (rough basis) or 8.3 mmt (milled basis); an increase of 6 percent from the current 2009/10 estimate reflecting better yields based on moralized weather patterns. Producers remain concerned about red rice and in particular, to its growing resistance to herbicides. Red rice is the main invasive plant in the South. The presence of red rice has resulted in lower prices to producers. Red rice infestations began to be controlled in 2004, however, now there are reports that in some areas red rice is almost 100 percent resistant to herbicides. Imports With 2009/10 national production down due to adverse weather, Post is increasing its import estimate to 1 mmt, the highest level since 2003/04. Brazil will source the vast majority of these rice imports within the Mercosul block, principally Argentina and Uruguay. These countries maintain competitive advantage in the Brazilian market due to lower land and production costs, lower transportation costs, shorter delivery times and zero-duty access. However, there are reports of Brazil needing to source outside of Mercosul. Although there was speculation that there would be opportunities for U.S. exports in January, the probability of this occurring has been reduced because prices have fell more than 10 percent in February.. The 2010 tariffs on non-Mercosul rice is 10 percent for HS1006.10 (excluding for seed), 10 percent for HS1006.20, 12 percent for HS1006.30.11 and HS1006.30.21, and 10 percent for HS1006.30.19 and HS1006.30.29, and 10 percent for HS1006.40. With 2010/11 production is expected to rebound, imports are forecast to fall to 700,000 mts. Page 20 Exports Over the past few years, Brazil has positioned itself as a rice exporter. From March 2008-February 2009, it shipped a record volume with a value of over US$330 million. Brazil now faces the challenge of maintaining its position given this year‟s production shortfall. The Brazilian rice industry has been upgrading it facilities at the Port of Rio Grande and investing in new processing structure with an eye toward the foreign market. Rio Grande do Sul, which accounts for one-half of domestic production, has an export target of 10 percent of its crop. In 2008, Brazil expanded export sales of value-added products finding niche markets for white and parboiled rice in Nigeria, Senegal, South Africa and Benin. Despite these efforts, most analysts suggest that it will be difficult to keep up this export pace when faced with a production shortfall. They say that internal demand will be satisfied first. One option to maintain a presence in foreign markets is for the Government of Brazil (GOB) to take action to preserve outside markets by having the Food Supply Company (CONAB) auction off part of its 1 mmt exclusively for export sales. Post estimates2009/10 exports at 300,000 mt, less than one-half of the 650,000 mt exported in 2008/09. In 2010/11, exports are expected to increase to 500,000 tons. Stocks: Storage is particularly tight at rice harvest since Rio Grande do Sul, the principal producing state, is also a major soybean producer with the two crops harvested simultaneously. Policy: A normative instruction which establishes new classifications, identity requirements, quality and labeling standards of rice went into effect March 3, 2010. This instruction applies to imported as well as domestic rice. Producers supported updating the normative instruction to bring it more in line with international standards as they seek to increase exports. Marketing: The Government of Brazil (GOB) announced R$600 (US$333) million in guarantees for the commercialization of rice. This funding will preserve rice market prices affected by excessive rain and a potential reduction in international prices. Another R$600 (US$333) million could still be made available if producer prices fall below R$23 (US$12.78) per sack.