There's not much new in the U.S. rice outlook other than another year of record imports, a mixed report on exports and continued uncertainty over production.

According to Nathan Childs, senior rice market analyst with USDA's Economic Research Service, speaking at the USA Rice Outlook Conference in Little Rock, the U.S. crop is up by 3 percent over last year, due to a 6.5 percent increase in area which was somewhat offset by a 3.5 percent reduction in yield. Long grain rice accounts for all of the increase in production. Average yields are down from last year, but are still the second highest on record at 6,959 pounds per acre.

Export bans in key countries were a huge factor for higher U.S. acres in 2008, according to Childs. “From November, 2007 to April and May, 2008, prices spiked to the highest on record in international and U.S. markets. Going into 2008-09, we had an expansion in area driven by very strong prices. At that time, there were export restrictions by both India and Vietnam.”

On the downside, U.S. yields dropped by an average of over 200 pounds per acre this year, “due to late planting in the Delta where the bulk of the U.S. crop was grown. Then two September Gulf Coast hurricanes hit the crop. The Gulf Coast crop was harvested pretty much before the hurricanes hit, but much of the Delta crop lodged, with excessive rain and wind. It was also a very delayed crop.”

California yields “were not as high as our crop condition model was indicating. They had some delayed plantings and there were possibilities of smoke damage from fires.”

So far, the yield declines as reported by USDA “have not been very severe. We'll get another estimate in January.”

Domestic and residual use for rice for 2008-09 is the highest on record, up about 2 percent from a year ago. This indicates some per capita increase, according to Childs.

Childs sees U.S. exports for 2008-09 dropping 1 percent. “We see weaker sales to the Middle East for both medium and long grain rice. We project larger sales to the Pacific Islands, and we still see strong rice sales to Mexico and Central America.”

A bright spot for the U.S. export picture has been South America. “Traditionally, they have not imported much U.S. rice at all. But Venezuela has already purchased well over 100,000 tons and Colombia would like to purchase at least 70,000 tons.”

Childs expects medium-grain exporter Egypt to terminate its ban on exports - which it imposed in March 2008 - sometime this spring. “Egypt's exports dropped by two-thirds in 2008. We now see them coming back. We also expect India's export ban to terminate, and India will reenter the market sometime in the first half of 2009.”

The increase in rice imports is mostly driven by Thai Jasmine and Basmati rice, with Jasmine comprising about 70 percent of the total, according to Childs. “That market grows almost every year to a new record. And it grows faster than the domestic market, which means that the imports are taking up a larger share of the domestic market.

Childs says population growth will drive consumption of U.S. rice higher, “but we think there may be an income effect this year. That's something we've never dealt with before. In other words, people may shift from buying expensive foods to rice. Even at higher prices, it's a very low cost food and stores for a long period of time. So we may get a boost from a slowing economic situation.”

The season average farm price for rice is projected to be the highest on record at about $15 per hundredweight, Childs noted. “The previous record was in 1973-74, when it was projected at $13.80. It's very rare when you get over $10 for a season average price.”

Rough rice prices did not follow the same pattern as milled rice, according to Childs. Milled rice price started picking up rapidly in November at below $7 per hundredweight, and by late April, they were the highest on record. They actually doubled. Rough rice prices did not rise as rapidly. They continued to rise all summer while milled rice prices declined.”

Childs says the spike in prices in 2008 was heavily driven by artificial shortages driven by export bans. “There was enough rice in the market and the amount would not have justified $1,000 per ton rice.”

Childs expects medium grain prices to remain high. “Australia is virtually out of the market. The California crop is smaller and Egypt still has a ban. We can also question size of the 2009 crop in California concerning water availability.”

U.S. ending stocks are expected to drop 14 percent which portends a stocks-to-use ratio of under 11 percent, “which is very powerful for price. Stocks have now come down for three consecutive years. Ending stocks for medium-short grain rice is expected to drop 30 percent, and create the lowest ending stocks in over 25 years.”

For 2009-10, Childs expects a modest area expansion, higher yields, a smaller carryin and another year of record imports. “We see a buildup in stocks and a continued decline in U.S. and global prices.”