U.S. rice farmers are set to increase acreage significantly in 2018, but overproduction will be a mistake that will send prices downward.
“Do not overproduce. That is a key issue for 2018,” says Bobby Coats, professor of economics, University of Arkansas Extension.
Coats, in an interview following rice state update presentations at the USA Rice Outlook Conference, said Arkansas long-grain and medium-grain rice acreage likely will increase 15 percent to 24 percent, up to 1.28 million to 1.38 million acres in 2018. That’s up from 945,000 long-grain acres and 147,000 medium-grain in 2017.
Across the Rice Belt, acreage will increase by around 17 percent to 2.9 million acres, according to the World Supply and Demand Estimate (WSDE) report that came out Dec. 12. That report shows long-grain rice (2.175 million acres) accounting for most of the expansion. Medium- and short-grain area is projected at 725,000 acres.
“It is certainly important to understand that we do not need to overproduce, but should stay in a nice balance of supply and demand,” Coats said.
Demand should remain fairly good, he says, as the U.S. and global economies continue to show strength. “In the United States, we have the third longest business cycle in history. There is every indication that globally government and central banks will continue to put stimulus of trillions of dollars into the global economy for the next three years.
“In 2017, global growth was sustained by more than $3.5 trillion in stimulus put into the global economy.” He anticipates that trend to continue in 2018, 2019 and 2020.
That stimulus, he says, “will put a floor under hard assets like equities, commodities, land and fine art. So, 2018 should have a higher level of inflationary pressure. If we can keep our rice acreage, say in Arkansas, around that 1.25 million to 1.3 million acres, we can keep the price fairly strong for the producer. Exceeding that level really becomes problematic without new demand.
“If we overproduce, we are going to have more rice price weakness than we need. It will absolutely impact the profit margin.”