Adverse weather conditions in late 2009 and in 2010 have left central and southern Brazil, Uruguay, northeastern Argentina, and southeastern Paraguay, where two-thirds of the area and more than 85% of the rice production are located, lower in rice output in 2010.
The problems started during the early fall of 2009 when a severe drought spread across the main rice areas of the region and prevented water reservoirs from filling up. This situation continued during winter, causing farmers to abort their initial expectations of increasing rice area. Rainfall in the middle of the planting season further harmed farming activities. When water reservoirs soon recovered, farmers contended with a lack of sunlight next in March 2010—a time when crops were flowering and filling the grains. Consequently, more than 100,000 hectares of the total rice area was lost in the Southern Common Market (MERCOSUR) region during the 2009-10 season. The total harvested area reached only 3.2 million hectares. Yields also suffered. In Uruguay, average yields fell by 11% to about 7.1 tons per hectare (compared with its normal average of 8 tons per hectare). Rio Grande do Sul, Brazil’s largest rice-producing state, suffered as well when its yields dipped by 10.5%. In contrast, Argentina’s rice production increased, but that was not enough to keep the MERCOSUR region’s rice production from declining to 14.3 million tons, revealing an 8% reduction compared to the previous season (see Table 1).
Traders in the block
Uruguay is a highly specialized export oriented rice producer, exporting about Lower rice output in the Southern Common Market (MERCOSUR) of Latin America signals new challenges to Brazil and its fellow rice-exporting countries in the bloc Latin America 95% of its annual production. It is the largest rice exporter of MERCOSUR and a leading exporter in the world (with a 2.7% market share of global exports). Uruguay’s top five clients during the last trading season (March 2009 to February 2010) were Brazil, Iraq, Peru, Turkey, and Cyprus.
Paraguay traded 87% of its rice within the bloc, mainly to Brazil. Even as a traditional net importer, Brazil has become a significant exporter of parboiled rice, especially to Africa, which accounts for 75% of its exports (see Table 2).
Challenge to Brazil
Brazil has the largest population in the region, putting its total domestic consumption at 12.5 million tons. For years, the country has relied on its MERCOSUR neighbors to supply its needs. This year, it is expected to incur a 1-million-ton deficit. This is bound to increase if Brazil continues to export more than 500,000 tons of rice (mainly to Africa). How Brazil copes with this deficit depends on the bloc’s ability to meet its needs.
Given that the net production surplus of Uruguay, Argentina, and Paraguay is expected to reach 2.2 million tons (see Table 3), they should be able to meet Brazil’s needs—in theory. But rising exports from the bloc that eat up 1.4 million tons of the surplus leave Brazil with only a little more than 800,000 tons of availability. Hence, it is possible for Brazil to turn to sources outside the region. The entry of cheap rice into Brazil mainly from Vietnam has caused farmers to propose an increase in the common external tariff for rice from 10% to 35% to protect the local rice industry.
But rising exports from the bloc that eat up 1.4 million tons of the surplus leave Brazil with only a little more than 800,000 tons of availability. Hence, it is possible for Brazil to turn to sources outside the region. The entry of cheap rice into Brazil mainly from Vietnam has caused farmers to propose an increase in the common external tariff for rice from 10% to 35% to protect the local rice industry.
To completely meet Brazil’s demand in 2010, the other members of MERCOSUR must redirect at least 600,000 tons of their surpluses within the bloc. Relatively cheap alternatives only make this task more challenging. Brazil will likely import up to 200,000 tons of rice (paddy equivalent) from other exporters outside the bloc in the coming months.
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Dr. Lanfranco is a senior researcher in the National Agricultural Research Institute of Uruguay.
