Italian Indica paddy prices rise as European white rice supply concerns grow

London — Italian Indica paddy prices have continued to rise in January as concerns surrounding the prospect of a European Indica rice shortfall intensified.

According to brokers involved in the Italian market, the price of Indica paddy increased by Eur20/mt during the week ending Jan. 22 to Eur370/mt ex-works. A major mill also paid Eur380/mt ex-works for Indica paddy during this week for delivery later in the year. One broker felt that it was now a matter of time before Indica paddy reached Eur400/mt ex-works, with the only question being whether the price would be reached in one to two weeks or four to five. S&P Global Platts assessment of Italian Indica 5% broken white rice was at Eur620/mt ex-works on Jan. 22.

Prices have risen recently for two main reasons. Firstly, Italian 2020 Indica production declined sharply year on year. According to Ente Risi Nazionale (ENR), planted area decreased by 19% to 42,700 hectares. Due to adverse weather during the harvest period, some participants estimate the total production decrease at closer to 25% year on year.

While in a typical year this shortfall would be fulfilled by imports, container shortages in Asia and spiraling prices have complicated the usually straightforward task of supplying the European rice market. Various participants have reported in recent weeks that freight from Myanmar – a major supplier of low-cost rice to EU markets – has risen to $4,000-$6,000/TEU. Before October 2020, this cost was no more than $1,000/TEU.

Based on current freight costs and offers of Myanmar medium grain (faux-Indica) 5% broken white rice, a delivered Europe price could be anywhere between $620-$705/mt (Eur510-580/mt). As a result of recent freight increases, many European customers have reportedly sought to delay shipments. However, with other customers still eager to ship from Myanmar and other Asian origins now, it is likely that a severe backlog will need to be cleared in the coming months, with further delays expected.

According to ENR, Italian Indica stocks in farmers' hands – including stocks already committed – totaled 136,631 mt as of Jan. 19, down 46% year on year. Participants pointed out that this situation is especially precarious as harvesting of the 2021 crop in Europe will only begin in September. Farmers are currently in the process of deciding what varieties to plant for 2021, with planting decisions expected to be finalized in February. One major mill reported that they were encouraging farmers to increase Indica planting, hoping for planted area to increase to 60,000 hectares.

While one broker remarked that participants were not panicking yet, everyone realizes that there is a problem – "we don't have enough Indica paddy". A major buyer went further, characterizing the Italian market as being in a "dramatic situation". This has been compounded by similar situations in other major European origins – namely Spain and Greece – with this buyer also noting that "Greece is out of long grain".

A Greek mill disputed this assertion, but admitted that Indica supplies were "limited" as European demand has increased, with most stocks being dedicated to parboiling. Greek Indica parboiled rice was indicated at around Eur650-700/mt ex-works, with white rice indicated at a Eur100/mt discount.

A Spanish mill remarked that "it's the same situation in Spain", with increased demand and limited stocks. Large volumes may still be with farmers, but much of the volume is already committed for later in the year. One broker also stated that Spanish farmers are holding on to paddy and it is difficult to conclude fresh business. As a result, Indica paddy and milled rice prices are varying sharply, with the Spanish mill noting that 10 companies would likely give you 10 distinct prices.