After international rice prices saw a dip uptil May 2011, a rebound was witnessed during the last two months.
Global production, on the other hand, is expected to improve in 2011 relative to 2010. According to USDA statistics, at nearly 456 million tons, world rice production in 2011-12 is expected to be around six million tons greater than that in 2010-11.
However, the USDA has revised down the forecasted production from what was forecasted in June. Their revised forecast in July is a tad low by around 60,000 tons from what was forecasted in June.
Expectations of lower output from the US were the main culprit behind this, as the latest USDA report on US agricultural commodities shows a decline of over 6 percent in US rice production from the previous years level.
This was a key reason for the rebound in international rice prices witnessed lately.
Another factor stoking international prices was the new Thai governments policy plans of helping rice farmers by raising minimum rice prices - almost double the market prices at the time of elections - and purchasing an unlimited quantity at the higher prices from farmers, when the government is formed.
Considering Thailands share in global rice trade is about a third, this populist measure of the government will take a toll on rice prices around the globe.
Prices in Pakistan are reflecting international trends as well. The FAOs rice price index showed July 2011 prices for both varieties continuing the upward momentum seen in June 2011, with the cheaper Irri variety rising to $468 per ton - higher than any monthly price in the last two fiscal years.
While the sowing of the domestic crop has been completed in July, and an improved production has been forecasted for FY12 relative to FY11, harvests will begin around September, according to local traders. Until rice stocks are restored after harvest, therefore, domestic prices are likely to stay high due to dwindling inventories.
As far as exports are concerned, Pakistans exports in FY11 at 3.7 million tons were almost a million tons short of the quantity exported in FY10, though higher global prices in FY11 helped sustain the exports on a value basis.
For FY12, while a better production forecast promises greater exports in terms of volumes, on the price front, the rolling out of the Thai rice policy and reduced crop outlook of the US are likely to keep up the pressure on prices.
Though this does not necessarily mean a double treat in terms of volume and price rise for Pakistan, since Indias allowed rice exports, meaning improved supplies. Further, post-monsoon harvest in Asian countries, as well as the exact details of Thailands policy will be key for determining what direction the international prices take.
Hence, the current bull-run is plausibly a short-term phenomenon in the face of yet-to-unfold dynamics in the global rice industry. For Pakistan, even if international prices in FY12 do not repeat the highs seen in FY11, a volume-based growth in exports can be counted on.