

For decades, China's booming rice production enabled it to sell far more rice than it bought. But the world's biggest consumer of the grain has become a major importer.

Shoppers in Hefei, China, buying rice. Some analysts say that demand for rice is outpacing supply, a trend that would keep prices high. Agence France-Presse/Getty Images

In 2012, the country bought a record 2.6 million tons of milled rice, according to the U.S. Department of Agriculture. That was a sharp acceleration of a trend started in 2011, when China bought 575,000 tons. China had been a net importer of rice in just four of the previous 50 years.

The move has caused confusion and debate within the rice industry as analysts and traders try to determine the reason behind the sudden demand and what it may mean for food prices and the global economy.

Some analysts said they believe the buying spree is being driven by soaring demand from Chinese consumers. They say that even though China has bolstered production for nine years in a row, it isn't enough to feed its population. If true, the purchases may be the beginning of a major, enduring shift in the global rice market. They say this could spark worries about whether there is enough of the staple to go around, keeping prices elevated.

"If this year's pace continues, the concern is whether the rest of the world will be able to make up for the shortage of China's rice demand," said Cheng Fang, a senior economist at the United Nation's Food and Agriculture Organization, or FAO.

Others suggest there is a simpler reason. They say prices for rice set by the Chinese government are much higher than equivalent grades on the global market. That is creating a profitable trade for Chinese buyers who scoop up the rice from places such as Vietnam, Pakistan and India and then sell it at higher prices at home.

The trade has become more profitable in recent months. In mid-December, the average import cost for Vietnamese rice was about $410 a ton, and similar rice could be sold in China for about $635 a ton, traders said.


Whichever argument is correct has big implications for rice prices. If the demand is driven by rising consumption, the shift could propel rice prices higher over the next few years or decades, analysts said. If the purchases are a response to government pricing policies, it could leave global prices vulnerable should those policies reverse.

For now, prices are most often set between governments and large merchants. In the U.S., the rice-futures contract has been moving in a narrow range for the past year, largely because China doesn't buy rice from the U.S. Some U.S. rice farmers have noticed and are pushing the USDA and Chinese authorities to allow U.S. rice to be sold in China.

The direction of prices is important because rice is the main staple of more than half the world's population, making its price a focus of attention for world economists.

A rise in rice prices also tends to drive up prices of other grains such as wheat and corn.

A rice vendor in Hefei, China. Rice is the main staple of more than half of the world's population, making its price a focus of attention. Reuters

In 2008, a spike in rice prices triggered price increases in other major grains, which led to a global food crisis, sparking riots and political turmoil in many countries.

Most rice-consuming countries are big producers, too, leaving the global trade at just a small fraction of total production. In 2012, only 37.3 million tons of rice changed hands, representing 7.7% of global supply, FAO said. China consumes about 140 million tons a year, so any swing in its trade would have a huge impact.

Some analysts at the FAO are trying to get a better read on China's rice stockpiles. They say the rising imports, and high domestic prices, suggest that stockpiles may not be as high as previously thought.

The rising imports have caused the FAO to question its own estimate of China's rice inventories. Currently, the group projects that China will have 93.7 million tons of rice in storage at the end of September. This would be enough to feed China for 8.5 months—the highest on record.

"We think the estimate is probably too high," Mr. Fang said, adding that the FAO is working with the Chinese government and will revise the data after conducting field surveys and analyses. There is no official data on China's grain stockpiles, as much is hoarded by individual farmers and difficult to count.

Data from the U.S. Department of Agriculture also suggest that buying is partly driven by a fundamental need for more rice. The department estimates that China's demand will exceed production by 1 million tons in 2013, leading to another year of big imports next year. By the end of the July-June season, it sees China's ending stocks at 45.85 million tons, or less than four months' supply.

Write to Carolyn Cui at