Trends in the EU Rice Market and the Potential Impact of Brexit on ACP Rice Exports

Summary
While 6 ACP countries export rice to the EU, this trade is wholly dominated by Guyana and Suriname. The unit value of Guyanese and Surinamese rice exports to the EU has fallen 23% and 30% respectively between 2012 and 2017. This needs to be seen in the context of the granting of fully duty free-quota free access to LDC rice exporters from 2009 and the reduction of the EU intervention price for rice and shift over to direct aid payments to EU rice producers in 2013. Despite the price decline Guyana exported 31% more rice to the EU market in 2017 than 2007. Up to 2030 EU rice imports are projected to increase 16.7%, although this does not factor in the withdrawal of the UK from the EU. The UK takes 22.7% of total EU rice imports and 12.4% of rice imports from ACP countries. The UK’s withdrawal would impact on the EU’s TRQ based managed trade regime for rice, since such imports would then be concentrated on EU27 markets. What is more any moves by the UK to abolish current MFN tariffs on rice given the absence of domestic UK production would greatly intensify competition from Indian and Thai rice exporters, potentially pushing Guyanese and Surinamese rice exporters entirely out of the UK market.

EU Rice Production, Consumption and Imports: Recent Trends
While rice is produced in five EU27 member states (Italy (56%), Spain (25%); Portugal, Greece and to a far lesser extent France), overall the EU continues to have a structural deficit in the rice sect (1). In 2017 production was around 1.7 million tonnes of milled equivalent and consumption around 2.7 million tonnes (2).

Most of the rice produced in the EU (75%) is Japonica (short/medium grain) with the EU being self-sufficient in Japonica rice. With Indica rice production on a declining trend, the EU is a net importer of Indica rice’. There are regional variations in the consumption of rice in the EU, with demand for Japonica rice being concentrated in southern European countries and demand for Indica rice in northern European countries.

In 2017/18 the ‘EU imported 1.3 million t of rice (paddy, husked and milled, expressed in milled equivalent)’. The main suppliers were India (23%), Cambodia (19%), Thailand (17%), Pakistan (15%), with the remaining 25% coming from a variety of other countries (1), including ACP countries such as Guyana and Suriname, which accounted for 9.1% of total EU rice imports in 2017 (3).

EU rice production, consumption, exports and imports 2010-2018 (‘000 tonnes)

	2011	2012	2013	2014	2015	2016	2017	2018	+%
Production	12.5	1.	1.7	1.7	1.8	1.8	1.7	1.8	0%
Consumption	2.4	2.5	2.5	2.7	2.8	2.7	2.8	2.7	+12.5%
Exports	0.2	0.2	0.2	0.2	0.2	0.3	0.3	0.2	0%
Imports	0.8	0.9	0.9	1.2	1.4	1.2	1.3	1.2	+50%

Source: EC, ‘EU Agricultural Outlook for Markets and Income 2018-2030, tables, December 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2018/medium-term-outlook-2018-tables_en.pdf

In its December 2018 analysis the EC highlighted how since 2011 imports and domestic consumption of rice have increased sharply due to ‘abolition of tariffs under the Everything But Arms (EBA) agreement’ (1). This granted full duty free-quota free access to least developed country rice exporters from 2009. ‘Cambodia and Myanmar benefited from the concessions to increase their rice exports to the EU (1). Figures from the EU market access data base showed exports from Cambodia increasing 134% between 2012 and 2017, while export form Myanmar increased 1,410% (3).

While in its December 2017 report the EU claimed that from 2012 up to 2017 ‘India’s exports to the EU, which do not benefit from the EBA agreement, decreased slightly, by 4 %’, figures on the EC market access data base show Indian rice exports to the EU experienced a variable trend between 2012 and 2016. While export levels in 2016 were fully 21% below the levels attained in 2012, Indian rice exports to the EU increased strongly in 2017 (+40% on an annual basis) reaching levels 10% above 2012 export levels (3).

EU Imports of Rice form Cambodia, Myanmar and India 2008 -2017 (tonnes)

	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Total EU	1646350	1484646	1314837	1614672	1392703	1447659	1647194	1910831	1957504	2106762

Cambodia	2,656	12,086	38,682	122,925	119,728	227,010	251,365	304,811	327,541	279,876
Myanmar	559	437	241	12,052	25,923	39,657	157,843	198,245	166,091	391,331
India	306,396	252,939	246,718	242,761	491,031	365,783	343,163	437,381	386,409	539,529

Source: EC Market Access Data Base http://madb.europa.eu/madb/statistical_form.htm

Recent Trends in EU Imports of Rice from ACP Countries
In terms of trends in EU imports from the main ACP rice exporting countries, Guyana and Suriname (which in 2019 accounted for 99.9% of EU rice imports from ACP countries) the table below sets out trends EU rice imports since 2007.

Total EU Rice Imports and imports from the main ACP suppliers 2008-2017 (tonnes, € ‘000, €/tonne)

	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Total EU	1646350	1484646	1314837	1614672	1392703	1447659	1647194	1910831	1957504	2106762
Guyana
Volume	120,219	146,116	146,721	75,633	42,682	63,590	81,001	194,004	265,719	175,441
Value	54,190	53,463	51,595	29,178	16,819	23,610	26,777	61,996	74,790	53,451
Unit Val	450.8	365.9	351.7	385.8	394.1	371.3	330.6	319.6	281.5	304.7
Suriname
Surinam	20,448	26,331	33,489	17,243	16,333	13,764	21,029	5,723	24,251	15,591
Value	9,429	10,112	12,517	6,736	7,631	5,907	8,349	2,458	8,141	5,115
Unit Val	461.1	384.0	373.8	390.6	467.2	429.1	397.0	429.6	335.7	328.0

Source: EC Market Access Data Base http://madb.europa.eu/madb/statistical_form.htm

For Guyana there has been a highly variable trend in rice exports, with a key factor being the state of trade relations with neighbouring Venezuela. At one point Venezuela offered a very favourable rice for oil deal to the Government of Guyana. This saw exports to the EU fall 68% between 2007 and 2012. However from 2013 exports to the EU began to creep up again, before increasing by 140% between 2014 and 2015 and a further 37% in 2016. Export levels subsequently fell back in 2017 to levels 117% above the levels of 2014 and 20% above the levels prevailing in 2009, the year which marked the start of the take-off in imports of rice from EBA beneficiaries.

These export trends for Guyana largely reflected the difficulties linked to the political and economic crisis in Venezuela and a heightening of political tension around Venezuelan claims to Guyanese territory.

In terms of the impact of the increase in duty free-quota free access for imports from least developed countries, by 2017 the value of Guyanese rice exports to the EU was €53.5 million, down marginally on the value in 2008 which stood at €54.2 million. However with the export tonnage up 46%, this represented a sharp decline in the unit value of Guyanese rice exports of 32.4% compared to 2008. There were two phases to this decline in the unit price paid for Guyanese rice by EU imports: first and an initial decline in 2009; secondly a further steep and sustained decline from 2014.

While this suggests increased competition on the EU market from duty free-quota free imports from LDCs had an adverse impact on the price paid for Guyanese rice, this is not so clear cut, with imports from LDCs only really taking off in 2011, a year in which the unit price of Guyanese rice exports actually recovered somewhat. The increase in LDC duty free access was however definitely compounded by the lowering of the EU intervention price for rice in April 2013 and the shift over to direct aid payments for EU rice producers (including through the provision of voluntary coupled support -VCS).

Thus we find it was from 2013 not 2009 that the unit value of Guyanese rice exports to the EU began to fall, against the background of continued strong growth in EU imports from the main EBA rice exporters. The unit value of Guyanese rice exports fell 23% between 2012 and 2017, having marginally increased its unit value over most of the 2009-2012 period.

Meanwhile Suriname’s rice exports to the EU have declined within a variable trend, with exports to the EU never being more than 63% above the peak levels attained in 2010. However the unit price of Suriname’s rice exports has been consistently higher than the unit price of Guyanese rice exports. This nevertheless resulted in even sharper unit price declines from 2012 (with the exception of 2015).

By 2017 the export volumes of Surinamese rice were 53% down compared to 2010 export levels, while the value of rice exports in 2017 was €5.1 million down substantially from the €9.4 million in 2008. This represents a 29% all in the unit value of Suriname’s rice exports to the EU between 2008 and 2017.

Once again while this suggests increased competition on the EU market from duty free-quota free imports from LDCs had an adverse impact on the price paid for Surinamese rice, the impact of the move over to direct aid payments to EU rice producers and the reduction in the EU intervention price for rice also needs to be taken into account.

Prospects for EU Rice Production, Consumption and Imports to 2030
While in the EU ‘the total harvested area for rice is expected to decline slightly, to 420 000 ha’, yield improvements will see stable EU rice production. Meanwhile EU rice consumption up to 2030 is ‘expected to expand further slightly’ (0.4% per annum) to reach 2.8 million tonnes in 2030. The bulk of this increased EU consumption will be met from imports (+1.1% per annum).

EU rice production, consumption, exports and imports 2019-2030 (‘000 tonnes)

	2019	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030	+%
Production	1.7	1.7	1.7	1.7	1.7	1.7	1.7	1.7	1.7	1.7	1.7	1.7	0%
Consumption	2.7	2.7	2.7	2.7	2.8	2.8	2.8	2.8	2.8	2.8	2.8	2.8	+3.7%
Exports	0.2	0.2	0.2	0.2	0.2	0.2	0.2	0.3	0.3	0.3	0.3	0.3	+50%
Imports	1.2	1.2	1.3	1.3	1.3	1.3	1.3	1.3	1.3	1.3	1.3	1.4	+16.7%

As in other sectors EU projections do not factor in the withdrawal of the UK from the EU. In 2017 the UK accounting for almost 23% of total EU rice imports and the origins of UK rice imports. In 2017 UK imports came mainly from India (50%), Thailand (11%), Myanmar (10%), Pakistan (9%), Cambodia (5%), Guyana (5%) and the USA (5%).

UK Imports of Rice form Cambodia, Myanmar and India 2008 -2017 (tonnes)

	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Total UK	360,785	365,236	389,017	396,540	414,713	362,747	411,337	452,287	380,851	477,769

Cambodia	–	–	215	4,340	8,028	9,523	13,679	16,254	18,752,	21,693
Myanmar	–	22,	175	4,437	2,112	3,688	6,980	10,522	17,917	49,025
India	113,823	110,145	123,597	126,388	210,778	152,418	149,306	207,659	156,574	238,900
Thailand	57,029	65,374	57,562	66,891	28,649	30,528	48,993	52,406	54,031	51,570
Pakistan	72,680	67,420	87,835	86,878	41,527	64,395	102,679	76,111	52,843	43,139
Guyana	219	6,008	9,798	7,247	10,930	15,963	23,669	22,544	16,393	23,480
Suriname	–	–	916	123	–	250	409	–	–	250

Source: EC Market Access Data Base http://madb.europa.eu/madb/statistical_form.htm

Since 2008 EBA beneficiaries Myanmar and Cambodia have moved from 0 to 15% of UK imports of rice (compared to a move from 0.19% to 31.9% for the EU as a whole). On the UK market the rise of the LDC exporters has largely been at the expense of smaller rice exporters and the USA, although Thailand and Pakistan have also lost market share. India meanwhile has consolidated its position as the leading rice supplier to the UK market over this period (increasing its UK market share from 32% to 50%, despite not being eligible for duty free-quota free access under the EBA regime.

Comment and Analysis
The impact of Brexit in the rice sector will potentially be pronounced since beyond the ACP/LDC group of rice exporting countries, all of which enjoy full duty free access, access to the UK market is regulated through a complex EU system of TRQs with variable tariffs being applied in the interests of the limited number of EU27 rice producers (see annex).This needs to be seen in a context where the growth in UK rice imports since 2008 has been higher than for EU27 countries (+32% compared to +27%), with by 2017 the UK accounting for 22.7% of EU28 rice imports.It is unclear to what extent the UK will replicate the complex system of variable tariffs within import thresholds which is currently applied as part of the EU rice regime. The UK has no rice production and the UK government is currently discussing setting MFN tariffs at zero in all areas where the UK has no production interest. Such a policy move under a ‘no-deal’ Brexit scenario would be aimed at combatting the expected increase in food price inflation which would arise from the re-imposition of standard 3^rdcountry treatment to mutual EU/UK trade (see companion epamonitoring.net article, ‘Why Eliminating UK MFN Tariffs on Bananas Would be Bad News for ACP Banana Exporters’, 11 March 2019).Any move by the UK government to the abolition of this variable tariff system would be likely to see existing ACP rice exporters squeezed out of the UK market, with India further consolidating its UK market position and a renewed export of Thai and Pakistani rice exports taking place.

Equally it is unclear what impact the UK’s withdrawal from the EU will have on the functioning of the EU’s complex system of managed market access arrangements under which TRQs are subject to variable levies. It is unclear to what extent the EU will be able to adjust the existing TRQs which regulate access to the EU market for non-ACP/non-LDC rice exporters in light of the withdrawal of UK import demand from the EU rice market. While there is a nominal EU/UK agreement to apportion WTO agreed TRQs between the EU and UK markets, given the complex system applied in the rice sector it is unclear whether this agreed EU/UK market apportionment formula will be upheld under a ‘no-deal’ Brexit.

This needs to be seen in a context where the bilaterally agreed EU/UK approach to the apportionment of WTO agreed TRQs is already being challenged in the WTO by existing beneficiaries.

In this context the question arises: what would be the value to existing TRQ beneficiaries of accepting an apportionment of EU quotas between the UK and EU27 market, if the UK government plans to eliminate MFN duties on rice imports, given the absence of any domestic rice production in the UK? Why would such exporters accept a reduction of access to the EU27 market, if they could get duty free-quota free access to the UK market anyway as a result of domestic UK trade policy choices?

In this context ACP rice exporters would be likely to see themselves facing increased competition on EU27 markets as a result of existing TRQ commitments for large competitive rice exporters being applied to an EU market which is suddenly almost 23% smaller. This would well squeeze ACP suppliers out of EU27 markets.

Sources:
(1) EC, ‘EU Agricultural Outlook for Markets and incomes 2018-2030’, text, December 2018
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/medium-term-outlook-2018-report_en.pdf
(2) EU Agricultural Outlook for Markets and incomes 2018-2030’, Tables, December 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2018/medium-term-outlook-2018-tables_en.pdf
(3) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(4) EC, ‘The EU Rice Regulatory Regime’
https://ec.europa.eu/agriculture/sites/agriculture/files/cereals/factsheet-rice_en.pdf

Annex

How the EU’s Rice Tariff System Works

‘Import duties for husked and for milled/semi-milled rice may be adapted twice, at the beginning and half of each marketing year (i.e. in September and in March), on the basis of imports licences issued during the previous period.

Current EU rice tariff system

	Paddy	Husked	Milled/semi-milled	Broken
€/t	211	30 / 42.5 / 60	145 /175	65

For husked rice there are two threshold:

if the imported quantities, excluding Basmati husked rice, are below the lowest threshold (382 226 t for a full marketing year, 191 113 t for the first six months), a duty of 30€/t is applied during the subsequent semester.
if the imported quantities are above the highest threshold (517 130 t for a full marketing year, 258 565 t for the first six months), the duty is fixed at 65 €/t.
if the quantities imported are between both thresholds, the duty is fixed at 42.5 €/t.

For milled and semi-milled rice (all types) the system is similar, but there is only one threshold (387 743 t for a full marketing year corresponding to 182 239 t for the first six months of a marketing year) and two possible levels of duty: 145 €/t and 175 €/t

Following international agreements under WTO or bilateral negotiations, various Tariff Rate Quotas (TRQs) allow rice imports at a lower or even zero duty. These various TRQs for rice are addressed in various regulations. They may be established for all origins or country allocated, and may be limited to one type of rice or open to all types of rice.

…

Most of the above quantities are imported at 0 duty (see details below). They include:

– 4 000 tonnes from Bangladesh which may be imported in other forms than husked rice;

– 22 000 tonnes from Central America and 40 800 tonnes from Peru which may be imported in
other forms than milled rice

Above quantities do not include duty-free rice imports with no quantitative limits from Least Developed Countries and ACP countries and of husked Basmati rice from India/Pakistan.

Commission Regulation (EU) No 1273/2011 provides for tariff quotas for imports of rice and broken rice linked to the GATT agreement of 1996. The following annual global tariff quotas are opened on 1 January each year:

(1) 63 000 tonnes of wholly milled or semi-milled rice covered by CN code 1006 30, at zero duty;

(2) 1 634 tonnes of husked rice covered by CN code 1006 20 at an ad valorem duty fixed at 15 %;

(3) 100 000 tonnes of broken rice covered by CN code 1006 40 00, with a reduction of 30.77 %
(leading to a reduced duty of 45 €/tonne in 2015)

(4) 40 216 tonnes of wholly milled or semi-milled rice covered by CN code 1006 30, at zero duty;

(5) 31 788 tonnes of broken rice covered by CN code 1006 40 00, at zero duty.

(6) 7 tonnes of paddy rice covered by CN code 1006 10, at an ad valorem duty fixed at 15 %

Note: these import tariff quotas are broken down into import tariff quotas by country of origin and divided among a number of sub-periods.’

EC, ‘The EU Rice Regulatory Regime’

https://ec.europa.eu/agriculture/sites/agriculture/files/cereals/factsheet-rice_en.pdf