What could 2016 bring to the U.S. rice sector?

Speaking to a packed room at the Mid-South Farm and Gin Show in Memphis, Carl Brothers pointed to USDA projected figures released in mid-February.

“They have Arkansas at 1.4 million acres (up 7 percent over 2015 acreage), Louisiana at 450,000 acres (up 7 percent), Mississippi at 170,000 (up 13 percent), Missouri at 190,000 acres (up 4 percent), Texas at 160,000 acres (up 20 percent), and California at 395,000 (down 7 percent),” said the Riceland Foods senior vice president and CEO, who began his career with the company in 1965. “Total U.S. acres are expected to be about 2.8 million acres (up 5 percent).”  

Those acreage bump forecasts are likely to be low, said Brothers. “Arkansas could be up more like 15 percent, Louisiana up 14 percent, Mississippi could be up to 26 percent, and Missouri up 8 to 10 percent. Texas – which has water again this year – could see acreage up to 185,000 acres.”

What’s driving the rice acreage increase in an environment where agriculture commodities are in a bear’s grip? “Someone said, ‘Rice is like the best house in a very depressed neighborhood.’”

Going back to 1980, the United States was the number one exporter of rice in the world. At the time, “world trade was just under 12 million tons. We were 25 percent of everything that happened in the world.

“Come forward to 2015 and world trade is at 41.3 million tons. The United States (rice exports) are flat while others’ shares are growing. This is very concerning.”

Back in 1980, Thailand was right behind the U.S. at 2.7 million tons exported. “The United States and Thailand were the key players.

“In 2015, India exported 11.5 million tons. Thailand exported 10 million and Vietnam was at 7.1 million. The United States had slipped to the fifth largest rice exporter. We went from Number One 35 years ago to now being fifth.”

So how has the U.S. crop been been moved? Domestic consumption.

“In 1980, domestic consumption was 55 million cwts while today it’s 127 million cwts. Where’s that coming from? Rice is now in pet foods and it wasn’t in 1980. There are now Mexican and Oriental restaurants all over – every restaurant in the country serves rice. In 1980, I remember going into restaurants and in Stuttgart and they didn’t have it.”

Domestic consumption has been U.S. rice farmers “salvation for the last 35 years. Our population has grown from 227 million in 1980 to 320 million in 2015 – a 41 percent growth. The influx of ethnics into our country means we’re serving rice more than we ever have before.”

Barriers

Another thing that’s happened in the past few years is export barriers erected against U.S. imports. Among them:

“We’re being criticized for our rice quality more than we’ve ever been.”

“There are a lot of import barriers in many countries that we could service more economically than they can service themselves.” However, high tariffs make that “almost impossible.”

“I thought the WTO would establish some baseline supports for farmers and they’d be taken down over time. Well, the only one that’s playing by the rules is the United States. I say everyone else is cheating.

“A U.S. International Trade Commission (ITC) study says that’s exactly what is happening. These people don’t even make reports (to the WTO). They haven’t reported in years.

“We had quite a discussion with the U.S. trade ambassador while we were in D.C. recently. I think we finally got their attention. They talked about bringing a WTO against one of those countries. We’d love for (the case to center on) rice but it could be any U.S. commodity.”

In 2007/08, there was a huge run up in prices. India and Vietnam cut down on rice exports out of concern they’d run out of rice in their countries. “Prices went up really high and they supported their farmers even more in an effort to feed their own populations. That fed into the whole domestic support issue.”

“Liquidity in the rice industry is quite different than with other commodities. If you look at global production exported annually, rice is at 80 percent. Soybeans are at 37 percent, corn is at 12 percent and wheat is at 22 percent.”

China, Cuba, TPP

Brothers briefly focused on a handful of rice-producing nations. The situation with China importing U.S. rice “is very sensitive and we’ve been asked not to talk much about it. We’ve basically reached an agreement on the phytosanitary protocol, although it hasn’t been officially signed.”

At that point, a fire alarm sounded and strobe lights began flashing in the hall. After the ear-screeching noise ended after a few minutes, Brothers quipped to much laughter “that’s what happens when you talk about China.”

Regardless, U.S. officials “will be in China in March and we hope this comes up then. We want to get things signed off on and finally export U.S. rice to China.

“You have to remember China raises a third of the world’s rice. … I think our opportunity in China will be to fill a niche. We can’t materially impact a country that’s already growing a third of the world’s rice. We can carve out a niche largely based on food safety because China’s isn’t always the safest. That’s our intention and hopefully we’ll begin that later this year.”

What about Cuba? “Having access to the Cuban market could be so important to us. I just don’t know when it’s going to happen. We talk with Cuban (officials) quite often and there just aren’t many specifics. … Of course, we’re not allowed to give them terms. If that changes, perhaps we can get it done.”

The Trans-Pacific Partnership (TPP), which is expected to soon be voted on by Congress, has several concerns for U.S. rice. “Mexico has a 40 percent duty on Vietnamese rice that would see a 10-year phase-out. That’s very concerning and we expressed that to the (Obama) administration. It really bothers me that Vietnam is not only cheating on their domestic supports but is being rewarded in this case.”