Thursday, May 9, 2013

Long Grain Rice Shunned by Chinese Consumers

China's rice market is becoming segmented. Short grain japonica rice--especially that from the northeastern provinces--is gaining popularity while hybrid indica rice is increasingly shunned by consumers who can afford better-tasting rice. Indica rice is diverted to food processing, liquor, and flour where it has to compete with cheap rice imported from Vietnam and Pakistan.

A report from Hangzhou describes Old Song's shop that used to sell a lot of cheap hybrid indica rice to elderly people and migrant workers, but now stocks short-grain japonica rice almost exclusively. According to market managers, it's now hard to find indica rice in Hangzhou--one of China's most prosperous areas. People there consume mainly rice from the northeastern provinces or japonica rice from Jiangsu and Anhui. Only about 10 percent of the rice in the market is indica and it's bought mainly by food processors and factory cafeterias.

Japonica rice has a short, rounder grain--Guangdong people call it "fatty rice" because of its round shape. Its taste and texture are preferred to indica rice which has a longer, thinner grain and is not as sticky.

As with many Chinese food commodities, the price of indica rice has been falling this year. According to one market manager, the Chinese economy has been slow since last year and fewer migrants--who like to buy cheap indica rice--have been coming to coastal areas.

Cheap indica rice from Vietnam and Pakistan is competing with domestic indica rice. In Ningbo, imports of rice have grown nearly five-fold this year compared with the same period last year. Of the 3000 metric tons imported, 2000 metric tons came from Vietnam and 1000 metric tons came from Pakistan. According to a rice analyst, Vietnam eliminated its price floor for rice and anticipates a big harvest this year that could drive the price even lower.

Early this year the price of Vietnam rice in Guangzhou’s wholesale market price was 1.67 yuan/500g or so, and it has fallen to 1.61 yuan.

According to the rice analyst, the price of an Anhui Province brand of indica rice fell from 2 yuan/500g at the beginning of the year to 1.85 yuan now. The paddy rice price was 1.35-1.36 yuan at the beginning of the year, and fell to 1.25 yuan/500g. In a region of Jiangxi Province, the price of paddy rice has fallen below the price floor.

Reportedly, sales are slow for rice mills and they are not buying much paddy rice. In one region of Hubei Province, sales are only half their usual level and many mills are idle. Slow sales at this time of year are common, but the decline in rice prices this year is unusual.

In Hangzhou wholesale markets, the average price for late indica rice from Anhui Province averaged 1.78 yuan/500g on May 7, down 12 percent from a year ago. The price of japonica rice from Jiangsu Province was 2.04 yuan/500g, down 9 percent from last year. The price has increased only for the best quality japonica rice from northeastern provinces--2.39 yuan/500g, up from 2.34 yuan last year. An analyst foresees tight supplies for northeastern rice as it becomes the preferred type of rice nationwide.

This trend also raises questions about China's "food security" strategy. Authorities are supporting the price, giving subsidies and officials have been leaning on farmers keep planting two crops of indica rice per year. Yet it turns out this rice is unwanted by Chinese consumers and is increasingly used for liquor, monosodium glutamate, and instant noodles--not exactly vital food products.


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