London — Japonica production has expanded year on year, though water shortages in recent months are expected to have curbed Indica production throughout Mercosur countries, with harvesting now getting underway, sources said.
Japonica production in Argentina – the main Japonica exporting Mercosur country – is expected to expand by approximately 12% year on year, according to a mill source. This source forecast Japonica paddy production at 100,000 mt, with farmers switching from Indica to Japonica due to the shorter growing cycles of some Japonica varieties as suitable rainfall materialized late in the planting season.
However, a second mill source disagreed with this outlook. While they stated that "there is probably some more" Japonica acreage this year, the source did not anticipate such a significant shift. The source also noted that an increase in domestic Japonica consumption may offset any production increase.
While the country's Carnaroli crop has already been harvested, the bulk of harvesting for other varieties, such as Fortuna and Yerua, is not expected to begin until late March.
Most of the Carnaroli crop has already been sold within the Argentinian domestic market, in addition to Brazil and Chile, with a source indicating the price of milled Carnaroli at $920/mt ex-works or $1,000/mt FOB FCL. However, exporters are yet to properly begin marketing other Japonica varieties as they await greater clarity on the quality of the crop before entering into sizeable contracts.
In Uruguay, a mill reported that they expect Japonica production to increase by 1%-2% on the year and that Japonica varieties should account for approximately 5% of the Uruguayan crop. However, a second mill pointed out that while water shortages curbed further production increases, the quality of the crop looks "very good." The first mill reported that the main reason for improved acreage has been a concerted push by mills to convince farmers to switch from Indica due to healthy financial returns.
This source said that less of their Japonica crop than usual had been sold by this point compared with last year. Unfavorable Turkish tariffs were pointed to as the primary cause. While Turkey temporarily lowered its rice import tariffs in late December until the end of April, South American mills are unable to ship new crop to Turkey by this point. Turkish domestic prices have also been under pressure in recent weeks, further curbing demand.
The source said that they were offering milled Perla rice to Turkey at $820/mt FOB FCL, but only expected firm buying interest if their offer was $70/mt below this. An Argentinian mill agreed, reported that offers of milled Fortuna at $800/mt CFR Mersin were likely to be rejected. Both sources were happy to wait for Turkish domestic prices to increase to a point where they could sell at their offer levels.
As a result, Brazil has been Uruguay's main Japonica market in recent weeks. Financial returns for selling to Brazil are currently much greater compared with selling to Turkey and other Middle Eastern destinations due to logistical and tax advantages. A mill reported that they would offer milled 404 to Brazil at $725/mt FOB FCL. A second source reported that selling 404 to Turkey remained unworkable due to expected tariffs.
