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Rice ramps up for record production

Questions linger, but rice remains the food staple of the world, with production expanding in reaction to high prices in 2008. Rice, a bellwether crop capable of measuring political climates, looks to seize opportunity in 2009.

Carl Brothers, senior vice president, Riceland Foods, Inc., Stuttgart, Ark., believes the current crop climate could work in rice’s favor. “I think this is a real opportunity in many respects for rice, because if we have any problems in the world, rice is one of the crops that looks like it has the biggest opportunity to stay relatively firm and even rebound from where we are. Currently there is pressure, but there is opportunity.”

International rice prices have dropped significantly, a response to the run-up of 2008, when prices climbed over $1,000 per ton. “It didn’t last very long — nothing cures high prices like high prices; nothing cures low prices like low prices.”

According to Brothers, the declining market has caused buyers to pull back — a reverse of 2008, when high prices were anticipated and fostered forward buying.

He acknowledged that U.S. rice growers have been hurt by long grain milled rice exports — 565,000 metric tons in 2008, down from 1,008,000 metric tons in 2007. “That has been the Achilles heel of the rice market — our exports have fallen way short of what we would have hoped. We just found ourselves uncompetitive.”

As an example, Brothers pointed to Vietnam’s aggression in the international rice market, to the extreme extent of underselling Thailand by $100 per ton at times. With the United States selling at prices $100 to $150 per ton higher than Thailand, U.S. competition with Vietnam has been hobbled.

However, Vietnam’s position has shifted, and this may create opportunity for U.S. growers. “The Vietnamese have undersold everyone. I’m hearing that their status is they’re oversold and have pulled back for the moment. They are not allowed to make additional sales out of the old crop, and won’t harvest a new crop until April. The feeling is they won’t be back in the market until April; that should open a window for us in the United States in the short term, and we’d sure like to take advantage of that,” says Brothers.

Several issues continue to frustrate the U.S. rice industry regarding global markets in Iraq, Cuba and Mexico.

Iraq has been purchasing the bulk of its rice from Vietnam, with little indication of change or interest in U.S. rice. “We’ve spent an awful lot of money there, for them to ignore us,” says Brothers. “They have basically told us they’ll buy wherever they get the biggest bang for their buck. To date, that’s been Vietnam. We haven’t seen a single reported sale to Iraq from the United States.”

The purported U.S. troop pullout from Iraq only raises further questions for Brothers. “I know we’re now talking about pulling out troops. I don’t know if that’s going to help us (U.S. rice industry) or hurt us.”

Regarding Cuba, U.S. rice officials continue to push for the opening of trade and travel, particularly in consideration for payment in advance. Prior to taking office, President Obama leaned toward easing restrictions, but Brothers is uncertain if the Obama administration will continue to maintain such a forward-leaning posture.

“I do think we need to move on this while the iron is hot. I think the longer he’s in office and no action is taken, the colder this situation will get. Hopefully we can make this happen here in the next few weeks.”

Concerning Mexico, a quality dispute has hindered U.S. rice exports. In December 2008, Mexico halted importation of U.S. rough rice shipments due to kernel smut. “They claimed they didn’t have smut and it would affect their own production and didn’t want it in the country. It tied things up for about a month,” states Brothers.

Currently, U.S. rough rice heading into Mexico must be fumigated at the border, and must then sit for approximately 90 hours before gaining entry. “Hopefully it’ll be worked out and not even have to do the fumigation. It just causes a few more problems with shipping rights to Mexico.”

Against the backdrop of incessant international political maneuverings, U.S. planted acreage in 2009 appears to be on the rise. Brothers, referring to Informa’s January prediction of 2009 acres, detailed the acreage outlook:

• Arkansas is up 7 percent, from 1.4 million acres in 2008 to 1.5 million acres in 2009.

• Louisiana is up 3 percent, from 470,000 acres in 2008 to 485,000 acres in 2009.

• Missouri is up 5 percent, from 200,000 acres in 2008 to 210,000 acres in 2009.

• Mississippi is up 4 percent, from 230,000 acres in 2008 to 240,000 acres in 2009.

• Texas is up 3 percent, from 175,000 acres in 2008 to 180,000 acres in 2009.

• California is up 3 percent, from 519,000 acres in 2008 to 535,000 acres in 2009.

• As a whole, the United States is up 5 percent, from 2.995 million acres in 2008 to 3.15 million acres in 2009.

Brothers sounded a word of caution regarding medium grain rice, emphasizing the unpredictability of the California water crisis. Since the Informa report was issued, he has heard reports of California rice acreage registering declines of 25 percent to 50 percent.

“There is still time for recovery, but that is something to watch very closely. I will tell you there has been a lot of contracting of medium grain for the new year. There are some pretty attractive contracts out there being driven by concerns that if California doesn’t come through with its normal acreage this medium grain thing could get really tight. I think you need to be careful.

“I’m hearing that some mills from California, some players — I’m not sure who they are — may be contracting in the Mid-South through different people to take rice to California to blend. That’s the latest rumor I’ve heard and have not been able to substantiate.

“Medium grain looks good, but I just caution you to be careful once we get beyond a certain amount of medium grain — particularly if the Californians come back with any kind of normal crop. I hate to say this, but they have a better product than we do. Our product doesn’t fit well in those Oriental markets they serve — Japan and Taiwan.

“It’s unlikely we are going to sell our Southern medium grain, because of the difference in the rice itself. Again, the opportunity is out there on some purchase contracts … but just a word of caution to you.”

Despite the vagaries of the international rice market, and questions over domestic medium grain issues, U.S. growers have confidence in their product. Brothers says farmers continue to tell him, “Rice still seems to pencil out better than most of the other crops.”


TAGS: Rice
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