Overview

A lingering drought in Taiwan has, thus far, minimally impacted Taiwan's total rice supply considering sufficient stocks. The drought's impact will reduce 2015 production by 10%, estimated. Given sufficient domestic stocks, the estimated 10% reduction in 2015 production just offsets production targets and leaves no need for supplementary imports.

In 2014, U.S. rice exports to Taiwan were lower than the anticipated 56 TMT (64,634 MT brown equivalent) committed to under Taiwan's WTO country specific quota (CSQ) due, in part, to delays resulting from the U.S. West Coast labor issues. However, approximately 16 TMT (18,534 MT brown equivalent) of the 2014 U.S. rice CSQ failed three U.S.-origin tender offers and were therefore opened for global contract. Adjustments to the 2015 TRQ rice tender schedules are not anticipated as the 2014 U.S. rice CSQ tender was contracted with later delivery terms due to the West Coast port situation.

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Taiwan

USDA Official

New post

USDA Official

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USDA Official

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Area Harvested

270

271

260

248

0

270

Beginning Stocks

363

363

267

365

0

320

Milled Production

1,113

1,217

1,131

1,100

0

1,200

Rough Production

1,590

1,722

1,616

1,571

0

1,714

Milling Rate (.9999)

7,000

7,067

7,000

7,000

0

7,000

MY Imports

101

104

125

134

0

126

TY Imports

101

104

125

134

0

126

TY Imp. from U.S.

50

45

0

53

0

56

Total Supply

1,577

1,684

1,523

1,599

0

1,646

MY Exports

10

19

10

19

0

19

TY Exports

10

19

10

19

0

19

Consumption and Residual

1,300

1,300

1,300

1,260

0

1,280

Ending Stocks

267

365

213

320

0

347

Total Distribution

1,577

1,684

1,523

1,599

0

1,646

1000 HA, 1000 MT, MT/HA

PRODUCTION

Taiwan produces two rice crops a year. Substantial government support means domestic rice is not price competitive in the global market. Therefore, domestic production is primarily for local consumption, accounting for approximately 90% of the total staple rice consumed in Taiwan, the remaining 10% is met by imported rice under the WTO TRQ.

After their 2002 WTO accession, Taiwan targeted domestic rice production at 1,130 TMT from 260,000 hectares. Taiwan was not immune from the 2007/08 global food price spikes which raised food security concerns; Taiwan is only about 33% self-sufficient in food production. To encourage production, Taiwan authorities upwardly adjusted domestic rice purchase prices by 13% in 2011, enticing farmers to expand rice production beyond the Council of Agriculture (COA) targets. As a result, there has been a steady 10% annual increase in rice harvest area. Rice output in 2014 exceeded 1.20 MMT, approximately 8% higher than the target level due to favorable climate conditions expanded harvest area (11,000 hectare larger than the target production area).

Taiwan is currently facing a drought and near-record low reservoir levels. In December 2014, authorities announced plans to immediately fallow 44,000 hectare of arable land. About half of the fallowed area is under rice production. According to Taiwan's agriculture authorities' estimate, 2015 rice production is reduced to 1.10 MMT from 248,000 hectare. However, sufficient stocks from over harvests in recent years realize minimal supply impact.

Farmers will receive additional subsidies to offset losses. The amount of compensation varies depending on land use, but for rice farmers NTD $85,000/hectare cap, equivalent to USD $1,085/acre at USD$1 = NTD31.60, to fallow crops. Funding will be sourced from Ministry of Economic Affairs, the COA and other Taiwan Ministries/agencies. Rice farmers also have to option to shift production to other crops, but with lower compensation.

Stocks

As the result of a spike in world commodity prices during 2008, COA revised its agricultural production policies to increase food self-sufficiency by gradually adjusting upward its rice security stocks to 352 TMT from the previous level of 260 TMT. Higher than target production in 2014 resulted in higher ending stocks. Given sufficient domestic stocks, the estimated 10% reduction in 2015 production just offsets production targets and leaves no need for supplementary imports. Also, adjustments to the TRQ rice tender schedules are not anticipated as the 2014 U.S. rice CSQ tender was contracted with later delivery terms due to the West Coast port situation.

CONSUMPTION

In a drive for greater food self-sufficiency, COA promotes domestic rice flour as a substitute for imported wheat and wheat flour. Taiwan authorities, however, face a tough battle to reverse declining per capita annual rice consumption that once stood at 98 kg but fell to only 45kg in 2013. By comparison, over the past 30 years, per capita wheat consumption has risen from 23 kg to 36 kg. Taiwan's goal is to reach a 40% overall food self-sufficiency rate by 2020 compared to 33% at the present.

Taiwan looks to Japan as a model for breeding specialty high yield and high amylose rice varieties for flour milling. Currently, two rice flour mixes for bread baking are available on the market. However, such substitution efforts have had limited success in persuading consumers to choose rice flour for their baking needs. This preference is not only due to the fact that rice flour is priced significantly higher than wheat flour, but rice flour-based bakery products also have a shorter shelf-life as rice starch ages faster than the wheat at room temperature.

Taiwan's COA also promotes traditional rice noodle products made from 100% rice flour as a way to increase rice consumption. Currently, many rice noodle products are made with a large percentage of cornstarch or other lower priced starches to cut production cost. According to Taiwan's national standard, a product labeled "rice noodle" must contain a minimum 50% or higher of rice flour; otherwise the product shall not called "rice" noodles.

Based on these factors and combined with a very slow population growth, total rice consumption is anticipated to remain around 1.28 MMT, including 100 TMT for feed use. The possibility for small growth exists considering the increasing use of rice flour ingredients in processed products. Higher consumption in MY2014 was due mainly to more old rice available for feed use, vis-a-vis lower consumption in MY2015.

TRADE

According to their WTO accession agreement, Taiwan's tariff rate quota (TRQ) for rice is 126 TMT (144,720 MT brown equivalent), which accounts for approximately 10% of domestic rice consumption. Taiwan's rice TRQ is divided into two portions: 35% or 44 TMT (50,652 MT brown equivalent) is reserved for private sector imports and 65% or 82 TMT (94,068 MT brown equivalent) is set for public sector imports.

The U.S. country specific quota (CSQ) allocation is 56 TMT (64,634 MT brown equivalent). A shift to increasing CSQ purchases of U.S. rice under the Simultaneous-Buy-Sell (SBS) regime has led to more imports of small, decoratively labeled packages of U.S. rice, primarily available at high-end retail outlets. By contrast, U.S. rice imported under the normal CSQ tender regime is included in public reservoir stocks and is released to the market per COA approval and oversight

Imports

All rice imports are made under the WTO TRQ of 126 TMT annually with CSQ allocations. According to Taiwan Custom's 2014 data, Taiwan imported 104 TMT of rice on a milled basis, of which the United States supplied 46 TMT accounting for 44% share, followed by Vietnam (28%), Thailand (16%), Australia (8%), and Myanmar (2%).

Lower U.S. rice imports in 2014 were primarily due to delayed U.S. rice CSQ tender schedule and contracts for later delivery. U.S. rice imports in 2015 are unlikely to exceed the CSQ.

Rice 2014 Imports, MT (milled)

Origin

HS100610 paddy

HS100620 brown

(milled)*

HS100630 milled-total

HS100630-0010-4

milled -glutinous

HS100640 broken-milled

Total/Share on a milled basis

U.S.A.

0

31,434 (27,348)

18,616

(1,638)

0

45,964 (44%)

Australia

0

2,503

(2,178)

6,477

0

0

8,655 (8%)

Egypt

0

0

0

0

0

0

Thailand

0

280 (244)

15,691

(4,125)

426

16,361 (16%)

Vietnam

0

72 (63)

29,591

(15,134)

0

29,654 (28%)

Cambodia

0

0

75

0

0

75

Japan

0

69 (60)

380

1

0

440

India

0

0

109

0

0

109

Pakistan

0

0

349

0

0

349

Italy

0

0

111

0

0

111

Myanmar

0

0

2,451

0

0

2,451(2%)

Malaysia

0

0

0

0

0

0

Indonesia

0

0

0

0

0

0

Uruguay

0

68 (59)

45

0

0

104

Spain

0

0

1

0

0

1

Total

0

34,426 (29,952)

73,896

(20,898)

426

104,274

Source: Taiwan Customs Arrival Data

* Import numbers in parentheses under HS100620 are on milled basis. Conversion factor is 0.87 to milled rice from brown based on Taiwan's official conversion factors used in its WTO rice TRQ calculation.

Private Sector Imports

The quota for private sector imports is divided among three separate auctions. Bidding is scheduled each year during the months of November, February, and April. See the table below for the bidding results for the 2015 quota allocation. Under the TRQ system, importers bid for quota rights that are sold to highest bidder(s). Using the so-called "System Three" quota bidding system, Taiwan has successfully allocated all 50,652 tons (brown basis) of its annual private sector import quota rights to local importers since Taiwan's entry to the WTO in 2002. According to COA's preliminary statistics, Taiwan's fill rate for the 2014 rice TRQ for private sector imports is calculated at 99.93% or 50,619 MT (brown basis), of which only about 123 MT(brown basis) was U.S. rice exported to Taiwan under the TRQ private sector imports.

2015 Private Rice Quota Allocation Schedule & Results (The 3rd allocation results of 2014 are included in the parentheses)

Product

Quota Amount (MT)

Quota Validity Duration

Date

Weighted Avg. Bid Price (per kg)

Max.

Bid Price (per kg)

Minimum

Bid Price

(per kg)

# of Allocations

Rice

15,000

Jan. 1/ Sept. 15

Nov. 26

NT$7.362

NT$18.500

NT$6.789

46

20,652

Mar 1/Sept. 15

Feb. 11

NT$7.826

NT$9.500

NT$7.368

40

15,000

May 1/Sept. 15

Apr. 29

(4/24/2014)

TBD

(NT$7.787)

TBD

(NT$11.000)

TBD

(NT$7.688)

TBD

(25)

Total

50,652 MT (44,067 MT milled equivalent)

Public Sector Imports under Country Specific Quota

The 65% quota for public sector imports is divided by both country of origin and tender type: SBS and normal tender. SBS tendering is subject to a markup price (a floor price), and normal tendering is subject to a pre-set ceiling price calculated on the basis of delivery and duty paid (DDP) terms for delivery to designated COA warehouses. To encourage SBS quota licensees fulfill their SBS obligations, effective 2013 SBS tender performance bond was increased from a flat 10% of award price to NT$2,000/MT (approximate $66/MT).

Regarding Taiwan's 2014 U.S. CSQ purchase commitments, Taiwan fulfilled their SBS tender commitments for 26,000 MT (brown basis) of U.S. rice. Regarding the U.S. rice CSQ under normal tender, on a brown basis, of the 38,634 MT only 20,100 MT were successfully awarded. The remaining 18,534 MT failed three U.S.-origin tender offers and was therefore opened for global contract.

For the 26,000 MT (brown basis) of the 2014 U.S. rice CSQ under the SBS scheme, 6,000 MT (as of reporting date) of U.S. rice is under an April 30, 2014 deadline, delayed due to U.S. West Coast labor disputes. If further delayed, the NT$2,000/MT (approximate US$66/MT) performance bond associated with the unfilled SBS quotas will be forfeited. However, importers are allowed to provide evidence that the West Ports slowdown caused the delays to exempt from the penalty. And importers have import motivations in particular an anticipated 10% reduction in domestic production due to current drought impact. With exception of 1,150 MT of glutinous rice tender which was contracted for delivery in 2014, the rest of the 2014 U.S. rice CSQ under normal tender are all contracted for May/June 2015 delivery. Finally, 3,000 MT of the retendered 2013 U.S. CSQ was contracted for delivery in February 2015.

(Note: COA's Agriculture and Food Agency (AFA) references the domestic wholesale price as an indicator when doing price comparisons between domestic and U.S.-origin rice.

2015 Country-Specific Quota (CSQ) Allotments for Public Sector Imports

Country

SBS Tender

Normal Tender

Total CSQ

Egypt

2,500

0

2,500

Thailand

8,300

0

8,300

Australia

10,300

8,334

18,634

USA

35,600

29,034

64,634

Total

56,400

37,668

94,068

Source: Council of Agriculture (COA) announcements

Exports

Taiwan's rice exports in 2014 amounted to 19 TMT, of which 16 TMT was dedicated to humanitarian food aid with the balance sold on a commercial basis. The average export freight on board sale price was US$1,744/MT (milled rice) and US$3,006/MT (brown rice). In accordance with Taiwan's food security policy, only top quality premium rice is allowed for export, generally in specialty consumer package. Exports for forecast year are expected to remain at the current level, of which only 3 TMT are for commercial exports. Under the bilateral ECFA, mainland China opened its import market to Taiwan rice in May 2012 with the first shipment in June of that year. As a resulted from a great deal of trade promotion efforts, Taiwan exported only approximately 2 TMT to China and Hong Kong in 2014. Taiwan's rice exports to China are produced primarily under the COA's Certified Agricultural Standards program, which is designed to promote Taiwan's agricultural production by certifying product quality and guaranteeing traceability.

Taiwan 2014 Commercial Exports, MT (milled)

Tonnage

Destination

HS100620 brown (milled)

HS100630

Hong Kong

207 (180)

967

China

23(20)

789

Australia

3 (3)

479

Singapore

14 (12)

191

Canada

19 (16)

19

Japan

0

0

Malaysia

20 (17)

18

U.S.A.

21 (18)

43

Others combined

21 (18)

255

Subtotal

328 (285)

2,761

Total

3,046

Source: Taiwan Customs Arrival Data

Taiwan 2014 Food Aid Shipments, MT (milled)

Recipient Destination

Tonnage

Haiti

3,640

Lesotho

120

Swaziland

80

Philippines

5,100

Pakistan

500

South Africa

800

Zimbabwe

300

Indonesia

840

Bangladesh

100

Cambodia

200

Jordan

3,100

Nicaragua

1,400

Mozambique

120

Solomon Islands

50

Tuvalu

50

Total

16,400

Source: Council of Agriculture (COA)

POLICY

Domestic Rice Purchase Programs

Taiwan established voluntary purchase programs for domestic rice in 1974. Under a policy to increase their food self-sufficiency, in April 2011, COA announced an NT$3/kg increase in prices for domestic paddy rice purchases. As a result, paddy sales to the government doubled from 191 TMT in 2010. In 2013, 406 TMT of paddy sold to government accounted for approximately 25% of total annual output. More domestic rice enters public stocks, which might be contributed to increases of U.S. rice CSQ under SBS tender.

Blending of Domestic and Imported Rice Prohibited

Effective December 18, 2014, blending of foreign and domestic rice in branded rice packages is prohibited. Authorities found that (cheaper) domestic rice was blended with more expensive domestic rice, and marketed as locally produced, therefore commanding a premium. This wide-reaching practice brought to light in August 2013, when one company was found to have mislabeled foreign product as domestically produced. Under public criticism, COA revoked the company's rice dealer registration. As a result, this company failed to import 3,000 MT of U.S. rice under the 2013 U.S. rice CSQ normal tender and the other 2,000 MT of U.S. rice under the 2013 U.S. rice CSQ SBS scheme. COA retendered and contracted this 3,000 MT for February 2015 delivery. Still, some feel the labeling policy change may be an opportunity to promote U.S. rice and U.S. rice varieties, including U.S. long grain and southern medium grain.

Long Grain Rice Ban Lifted

In late November 2014, Taiwan authorities lifted the longstanding ban on U.S. long grain rice. Taiwan imposed an import ban on U.S. long grain rice immediate after the LibertyLink incident, summer 2006. However, recent tenders for U.S. long grain rice failed as the amylose specifications were beyond what U.S. suppliers could guarantee.

Grading Standards

Taiwan's National Standards for rice (Rice CNS) are rather strict; in 2013 such caused inadvertent (mis)labeling and grading issues for U.S. rice arriving in Taiwan. Taiwan and U.S. rice authorities held technical meetings in May 2013 to review quality standards. Since this, there have been fewer reported incidents of quality and/or labeling disruptions.

MARKETING

Domestic rice prices are higher than the world market. To compete with imported rice, COA works with local rice millers/farmers under a voluntary Taiwan Good Rice Program to increase demand for domestic rice by producing and promoting specialty rice varieties with geographical indicators. Rice gift packages for celebrating holidays, weddings, and other events are increasingly popular. Taiwan rice producers hold celebrations twice a year, celebrating the semi-annual harvest and promoting the freshness of locally-produced product