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Planted acreage, demand sources dictate ’18 rice market

Rice heads
Global rice acres are expected to increase, with Bangladesh leading the way.
If long grain rice acreage estimates stand, 2018 farm price likely will be below the current estimate for the 2017 average crop price of $5.27 per bushel.

If U.S. long grain rice producers can limit production to the March 29, 2018, USDA Planting Intentions Report, this should be a reasonably good year for our long grain rice producers. If a new demand source emerges and/or global rice production is off due to a weather event or some other anomaly, it could be a very profitable year if current planting intention are not exceeded.

 The Bottom Line

Long Grain USDA Supply and Demand Estimates

  • 017/18 long grain rice production is estimated at 127.9 million cwt., 23.1 percent below 2016/17. The 5-year average is 148 million cwt., and the 10-year average 149 million cwt.
  • 2017/18 long grain rice total supply is estimated at 180.4 million cwt., 13.9-percent below 2016/17. The 5-year average is 190 million cwt., and the 10-year average is 191 million cwt.
  • 2017/18 long grain rice domestic and residual use is estimated at 93 million cwt., 7th largest on record, compared to the 5-year average 95 million cwt., and10-year average 94.5 million cwt.
  • 2017/18 long grain rice total export is estimated at 69 million cwt., 9.7 million cwt. below last year, and compared to the 5-year average of 72 million cwt., and 10-year average 73 million cwt.
  • 2017/18 long grain rice total use is estimated at 161 million cwt., 17.4 million cwt below 2016/17, and below the 5-year average 166.7 million cwt., and the 10-year average 167 million cwt.  
  • 2017/18 long grain rice ending stocks are estimated at 19.4 million cwt. or 18.3 percent above the previous month’s estimate, 37.4-percent below 2016/17, 4th lowest in the previous 13 marketing periods. The 5-year average is 23 million cwt., and the 10-year average is 24 million cwt.  

 World Rice USDA Supply and Demand Estimates

  • 2017/18 world rice acreage at 161.5 million hectares is the second highest on record.  
  • World rice yield at 4.5 metric tons per hectare ties with the record 2016/17 record yield.
  • World rice rough production at 727.3 million metric tons is the 2nd highest on record. 
  • World rice milled production is the highest on record at 487.5 million metric tons, with higher production in Brazil, Burma, Colombia, Pakistan, Philippines, and Sri Lanka.
  • World trade at 48.6 million metric tons is the highest on record, which in part reflects the changing dynamics of the global rice trade, with higher imports for Bangladesh, Ghana, Indonesia, and the Philippines. USDA raised exports for Brazil, Burma, India, Pakistan, and Thailand.
  •  World rice total use at 480 million metric tons is the 2nd highest on record, exceeded only by the previous marketing periods 481 million tons.
  • World rice ending stocks at 144.4 million metric tons is the 2nd highest on record and 78.5 percent above the 2007/08 (10-years previous) and 21.5-percent above 2012/13 (5-years previous). 

 Long Grain Rice Price Outlook

The U.S. long grain rice price for the 2015 crop averaged around $11.20 per cwt or $5.04 per bushel; 2016 crop $9.61 per cwt. or $4.32 per bushel; and presently the 2017 crop is estimated at $11.70 per cwt. or $5.27 per bushel.

The average price the long grain rice producer receives for their 2018 production will be a function of several factors, with 2018 long grain planted acreage presently at the top of the list. The March 29, 2018, USDA planting intentions report indicated Arkansas long grain rice producers will expand acreage by 16 percent to 1,150,000 acres from 995,000 acres in 2017. U.S. long grain rice producers are expected to expand acreage by 12 percent to 2,030,000 acres from 1,811,000 acres in 2017.

If these long grain rice acreage estimates stand, then all things equal, one would expect the 2018 farm price will be below the current estimate for the 2017 average crop price of $5.27 per bushel.

 If one assumes current demand for the remaining 2017 marketing period, which runs through July 31, 2018, and no new demand source at current price levels, a reasonable price consideration would be around $10.55 per cwt. or $4.74 per bushel for the 2018 average rice price.

What is the potential for long grain rice prices to improve by year’s end?

First, that will be a key function of final U.S. long grain planted acres, with next key USDA estimate the end of June. Additional immediate soybean price weakness could easily grow U.S. long grain planted acreage by an additional 100,000 plus acres. Assuming current U.S. long grain rice planting intentions materialize, no major global weather events emerge, and no new demand source materializes, the $4.74 per bushel figure is reasonable.

Overplanting U.S. long grain rice in 2018 would be a key factor in price weakness. Expanding acreage beyond current March 2018 planting intentions would likely further depress long grain rice prices. 

Trade War?

The U.S. does not export rice to China, and when and if we do sometime in the future, the rice will likely be very high quality rice.

Presently, from a trade war perspective with China, we have always had trade challenges and probably always will; the past trade discussions have not been as public as the current verbal exchanges. From the U.S. ag sector perspective, certainly one must be concerned about damaging demand for our ag products with soybeans being a key concern. Also, a key worry for U.S. long grain rice prices related to trade war considerations is the impact on soybean and corn prices. Grain price weakness in general tends to place downward pressure on rice prices.

From a big picture perspective: on one hand, Brazil, Russia, India and China, the BRIC countries (also include South Africa), would like to be as self-sufficient as possible. On the other hand, the United States and China have much to gain by a mutually respectful working relationship. That said, it’s hard to see a truly fair trade and/or respectful relationship emerging anytime soon, which is why these public verbal exchanges have emerged.

 Also of Interest

See recent rice webinar videos include:

  • The Next Farm Bill, Market Outlook and Ongoing Trade Issues: April 12, 2018, Dr. Patrick Westhoff, Director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri-Columbia and a Professor in the MU Department of Agricultural and Applied Economics
  •  USDA-NASS: 2018 Planting Intentions and Grain Stocks Report, March 29, 2018: Eugene Young, Regional Director for the USDA-NASS Delta Regional Office located in Little Rock, Arkansas, which services the states of Arkansas, Louisiana and Mississippi.
  •  USDA Rice Projections to 2027, March 22, 2018: Nathan Childs, Agricultural Economist with USDA’s Economic Research Service.
  • International Rice Outlook 2017-2027, March 15, 2018: Dr. Alvaro Durand-Morat, Assistant Professor in the Department of Agricultural Economics and Agribusiness at the University of Arkansas.
  • The Global Rice Market and China’s Role Within It, March 8, 2018: Rachel Trego, International economist with the U.S. Department of Agriculture Foreign Agricultural Service.

 Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: [email protected]

Download Slide Show for charts and expanded details, Click Download Link




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