IS THE RICE SUPPLY MORE IMPORTANT THAN RICE DEMAND TO THE PRICE? WATER IS THE KEY TO RICE SUPPLY IF THE COST OF WATER GOES UP, SO WILL THE RICE PRICE. BY MILO HAMILTON WWW.FIRSTGRAIN.COM INDIA/CHINA ARE THE KEYS TO THE 21 ST CENTURY RICE AND WATER MARKETS.
WHY WATER MATTERS TO RICE WHEN YOU GROW YOUR RICE KNOW THAT THE WATER IS YOUR LIFE. -ZEN PROVERB
STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS S W O T
SO, WHO WILL SUPPLY THE RICE IN THE NEXT DECADE?
SWOT SUMMARY FIVE OPPORTUNITIES: #1 RICE IS ASIA S LARGEST IRRIGATED WATER CUSTOMER. #2 WATER RESOURCES PER CAPITA ARE DROPPING AT 1-2% PER YEAR IN ASIAN RICE COUNTRIES #3 RICE USES 70% OF CHINA S IRRIGATED WATER AND COSTS TWICE AS MUCH WATER AND LABOR AS OTHER CROPS IN ASIA. $4 IMPORTED RICE IS VIRTUAL WATER #5 RICE SUPPLY = YIELD TIMES HARVESTED AREA
SWOT ANALYSIS OPPORTUNITY COMPARED TO CORN RICE HARVESTED AREA IS GOING NOWHERE FAST! RICE HARVESTED AREA CORN HARVESTED AREA 185000 175000 165000 155000 145000 135000 125000 1990/1991 1998/1999 2006/2007 2014/2015
SWOT ANALYSIS OPPORTUNITY COMPARED TO CORN RICE YIELDS ARE GOING NOWHERE FAST! 6.00 WORLD RICE: NO GMO WORLD CORN: GO GO GMO! WORLD CORN YIELD WORLD RICE YIELD 5.50 5.00 4.50 4.00 3.50
SWOT ANALYSIS OPPORTUNITY ANY WONDER RICE STOCKS ARE PLUNGING? 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% 8 MAJOR RICE EXPORTERS STOCKS/USE: (Burma, India, Pakistan, Laos, Cambodia, Vietnam, Thailand, United States) 1990/1991 1991/1992 1992/1993 1993/1994 1994/1995 1995/1996 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
SWOT ANALYSIS FUNDAMENTAL OPPORTUNITIES: WHAT IS WRONG WITH INDIA? INDIA AG TRADE BALANCE FIRSTGRAIN FCT 2016/2017 IN BILLIONS USD 50,000 TOTAL AG EXPORTS TOTAL AG IMPORTS NET AG TRADE BALANCE 40,000 30,000 20,000 10,000 0 2013 2014 2015 2016
SWOT ANALYSIS FUNDAMENTAL OPPORTUNITIES: WHAT IS WRONG WITH INDIA? INDIA RICE SITUATION (STOCKS, EXPORTS ON RIGHT AXIS) 2016/2017 IN 000 MTS FIRSTGRAIN FORECAST 110,000 105,000 100,000 95,000 90,000 85,000 80,000 Production Consumption Ending stocks 30,000 25,000 20,000 15,000 10,000 5,000 0
SWOT ANALYSIS FUNDAMENTAL OPPORTUNITIES: IS INDIA OK JULY-SEPTEMBER?
SWOT ANALYSIS FUNDAMENTAL OPPORTUNITIES: CHINA PRIOR TO MAY 2016 CHINA RICE DEFICIT GROWING MIlled Production RICE IMPORTS Consumption 160,000 155,000 150,000 145,000 140,000 135,000 130,000 125,000 120,000 7000 6000 5000 4000 3000 2000 1000 0
SWOT ANALYSIS FUNDAMENTAL OPPORTUNITIES: BIG SURPRISE IN MAY 2016 CHINA RICE DEFICIT DISAPPEARS MIlled Production Consumption 160,000 155,000 150,000 145,000 140,000 135,000 130,000 125,000 120,000
SWOT ANALYSIS THIS IS DEJA VUE ALL OVER AGAIN. -YOGI BERRA SOYBEANS China Net imports Beans (left axis) and Rice (right axis) (in 000MTS) Net Soybean IMports Net Rice Imports 90,000 RICE RICE 6,000 80,000 70,000 BEANS 5,000 4,000 60,000 3,000 50,000 2,000 40,000 30,000 20,000 +13% / YEAR +12% / YEAR 1,000 0-1,000 10,000-2,000 0-3,000 1980/19811985/19861990/19911995/19962000/20012005/20062010/20112015/2016-10,000-4,000
WHERE CAN CHINA FIND A LOT OF RICE TO BUY? +34.0 ASIA -6.0 CHINA +7.0 AMER- ICAS. -12.0 AFRICA *IN MILLION MTS + EXPORTS - IMPORTS
SWOT ANALYSIS OPPORTUNITIES: % WATER RESOURCES PER PERSON VERSUS BRAZIL (@41,603 m3 per person) PAKISTAN 3% INDIA 4% BURMA 52% CHINA 5% VIETNAM 23% THAILAND 16%
SWOT ANALYSIS WEAKNESSES BRAZIL HAS NO INCENTIVE TO GROW ITS RICE PRODUCTION 18,000 16,000 14,000 12,000 10,000 8,000 6,000 South American Rice Production Brazil Production (Left in 000 MTs) South America (left in 000 MTs) Brazil as % of South America (Right) 75% 70% 65% 60% 55% 50% 4,000 1972/1973 1982/1983 1992/1993 2002/2003 2012/2013 45%
SWOT ANALYSIS OPPORTUNITIES: SOUTH AMERICA HIT BY EL NINO (-20%) SO WHAT IS NEXT? "MERCOSUR": BRAZIL, URUGUAY, ARGENTINA, PARAGUAY IN 000 MTS, FIRSTGRAIN FORECAST 2016/2017 12500 Milled Production Consumption Net Trade Linear (Net Trade) 2500 11500 1500 10500 500 9500-500 8500-1500 7500-2500 6500 1990/1991 1991/1992 1992/1993 1993/1994 1994/1995 1995/1996 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017-3500
SWOT ANALYSIS OPPORTUNITIES: MERCOSUR TRENDS
SWOT ANALYSIS FUNDAMENTAL WEAKENESSES: USA HAS BIG EXPORT ISSUES AHEAD
SWOT SUMMARY: US WEAKNESSES Four issues facing the USA #1 A futures contract that works RICE IS THE ONLY GRAIN THAT A FARMER REALLY CAN NOT BOOK THE PRICE AT PLANTING DUE TO LOW VOLUME. #2 Better rice quality. New hybrids? #3 Consumer perception of sustainable rice #4 Dynamic world demand
SWOT ANALYSIS MARCH COMES IN LIKE A BEAR AND GOES OUT LIKE A BULL * MARCH LOWS (RARE EVENT) * * * * * * * *
SWOT ANALYSIS Summary SWOT summary for Americas Rice Exporters THREAT: INSOLVENT RICE PRICES: NO FARMER PROFIT WEAKNESS: LONG TERM COLLAPSE IN WATER RESOURCES STRENGTH: CHINA RICE IMPORTS STILL STRONG THREAT: POST-EL NINO PRODUCTION RECOVERY? OPPORTUNITY: WATER SHORTAGES WILL PLAGUE ASIAN RICE EXPORTERS WILL RICE PRICES GAIN ON OTHER GRAIN PRICES DUE TO LOW STOCKS?
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THANK YOU! S W O T