08 February 2012
The Korean government recently released the 2012 Minimum Market Access (MMA) rice purchasing plan. Under the MMA, Korea will purchase nearly 368,006 MT of rice, comprised of 162,778 MT under the global quota (GQ) and several country specific quotas (CSQ) totaling 205,228 MT. The United States is expected to receive around 100,000 MT, or 27 percent of the total MMA taking into account the U.S. CSQ and the medium grain allocation. Eighty percent of the US CSQ quota has been allocated to table rice this year, compared to 55 percent in 2011.
The Korean government announced the release of the 2012 Minimum Market Access (MMA) rice purchasing plan, which is included at the end of this report.  Under the 2012 MMA, Korea plans to purchase its commitment of 368,006 MT of rice, up 20,347 MT or about 6 percent from last year.
The MMA is divided between the MFN global quota (GQ) of 162,778 MT and the country specific quotas (CSQ) totaling 205,228 MT. The GQ is further allocated by variety of rice: 25.1 percent to medium grain, 30.7 percent to short grain, 16 percent to long grain and the remainder to optional varieties. The United States is expected to receive 100,000 MT, or roughly 27 percent of the total MMA volume. The U.S. share is calculated by adding the 50,076 MT U.S. CSQ and the 50,000 MT GQ medium grain allocation.
The United States portion could potentially increase up to several thousand tons depending on whether Australia fills its medium grain CSQ and if not how Australia’s quota is redistributed under the global quota. Despite repeated requests in the past that all of the Australian CSQ be retained as medium grain under the global quota, Korea has maintained only the table rice portion as medium grain. Korea is likely to adhere to this position, which means an additional amount of 4,858 MT of table rice out of the 9,030 MT Australian CSQ this year could be available to U.S. suppliers.
This year’s announcement of the grain purchasing plan was released earlier than in years past in part because Korea is trying to expedite the tendering and delivering of rice to stabilize the domestic rice market. According to press reports, Korean farmers have been holding rice stocks in hopes of receiving higher prices later in the season. The tendering process is expected to be completed during the first half of the year. The delivery of most of the brown rice for processing is scheduled to be completed by the end of November 2012, while U.S. milled rice shipments are scheduled for delivery from June through July 2012, Chinese milled rice from July through September, Thai milled rice in July, and Australian milled rice in September, respectively.
Looking at the 2012 MMA in its entirety, Korea will import 110,401 MT of table rice and 257,605 MT of processing rice. While both these amounts continue to grow each year, the percentage of table rice is fixed at 30 percent of the overall MMA. Refer to Table 1 to see how these volumes have changed over time.
This year’s GQ is 162,778 MT, up 20,348 MT from last year. The GQ is generally for processing rice and is usually divided based on type: small, medium, or long grain rice. This year, short grain (SG), medium grain (MG) and long grain (LG) will represent 31, 25, and 16 percent of the GQ respectively. The United States is the primary supplier of MG rice to the Korean market, while China supplies all the SG and Thailand supplies most of the LG. See table 2 for the historical GQ allocations.
The remaining 28 percent is made-up of an optional variety allocation, which was first introduced in the 2008 MMA as a means of curbing government outlays on imported rice. Since that time this particular allocation, which includes traditional processing brown rice, broken rice and sweet rice, has grown each year and has doubled in size to 46,000 MT. The optional variety specification favors cost-competitive Southeast Asian suppliers, like Thailand and Vietnam. In addition, as this allocation increases in size it causes the GQ allocation for medium grain rice to grow at a slower rate, which limits opportunities that otherwise would have gone to U.S. suppliers. In fact, the MG allocation increased by 5,000 MT this year to 40,825 MT. O the other hand, the percentage of MG as part of the total GQ remains unchanged at 25 percent from last year.
Country Specific Quotas
Meanwhile, the aggregate CSQ volume remains fixed each year at 205,228 MT. The United States, Australia, Thailand and China each have CSQs. These quotas are comprised of both processing and table rice. Although the individual CSQs are fixed, the volume of table rice increases each year with an offsetting reduction in the volume of processing rice. Under the 2012 CSQ’s, Korea will purchase 110,401 MT of table rice and 94,827 MT of processing rice. See Table 3 for breakdown of CSQs.
The 2012 U.S. CSQ, totaling 50,076, is made up of 40,056 MT of table rice and 10,020 MT for processing. The U.S. table rice allocation of 40,056 MT compares to 27,473 MT in 2011 - or a 45 percent increase. The percentage of the US CSQ allocated to processing has consequently been reduced from 22,603 MT in 2011.
As a result, the U.S. share of total Korean table rice imports will be 36.3 percent in 2012, which is nearly 12 percentage points higher than last year. In years past, the U.S. share of table rice CSQs has fluctuated between 26 and 30 percent, depending on the redistribution of the Thai CSQ. The increased table rice allocation for the United States is due to a redistribution of reduced allocation of Chinese and Thai rice for table purpose. The rate for the latter is 24.4 percent based on historical trade patterns. The long grain Thai table rice has a very limited demand in Korea and as such has been re-allocated based on local market conditions. In recent years, Chinese table rice has also undergone slow auctioning. Due to the aforementioned market conditions, the U.S. table rice allocation under the 2012 MMA is 13,118 MT higher than it would have otherwise been. Please refer to Table 4.
Korea continues to designate U.S. table rice by #1 and #3 grades, despite calls from both industry and USG for the entire allocation to be designated as #1. According to the U.S. rice industry, since #3 grade table rice is not produced in the United States, U.S. suppliers are reportedly selling #1 rice as if it were #3 grade rice. However, aT and MIFAFF, continue to maintain a 90-10 ratio to meet market demand for both #1 and #3 in Korea.
This year, the Korean government has allocated all 10,020 MT of the US CSQ for processing to U.S. medium grain brown rice. For the past two consecutive years, the government tried to purchase 4,500 MT of U. S. long grain rice but was unsuccessful.
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