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What to expect from Arkansas long grain rice plantings

Forrest Laws Rice Harvest
A big Arkansas rice harvest in 2018 could mean lower prices.
Arkansas’ 2018 long grain rice acreage needs to remain in a range 1,086,750 to 1,173,000 acres (2017 = 945,000) or a 15 percent to 24.1 percent increase over 2017 harvested acreage and many would say that is not going to happen.

A question often asked: What is my 2018 Arkansas long grain rice harvested acreage expectation?

As an economist with no new demand expectations, Arkansas’ 2018 long grain rice acreage needs to remain in a range 1,086,750 to 1,173,000 acres (2017 = 945,000) or a 15 percent to 24.1 percent increase over 2017 harvested acreage and many would say that is not going to happen. Some suggest 1,250,000 harvested acres, others 1,350,000 acres and even others 1,400,000-plus, all of which requires a new demand source to market, a disruptive weather event, or some anomaly event to generate increased demand for our U.S. long grain product . 

 Remember 2016/17 marketing year long grain price: USDA’s 2016/17 farm market long grain rice price was $9.61 per cwt. or $4.32 per bushel. Reality is, with no new demand if 2018 Arkansas long grain rice harvested acreage exceeds a 15 percent increase over 2017 acreage or 1,086,750 acres, one should consider the possibility of increasing downward pressure being placed on long grain rice prices, so plan or manage your price risk accordingly.

Consider the following: Since 2009, U.S. and Arkansas rice harvested acreage has cycled from one year over-planting to the next year under-planting for varying reasons.

Between 2009 and 2010, U.S. long grain rice harvested acreage was up 24.8 percent, and price dropped from $12.90 per cwt to $11.00 per cwt., and during the same period Arkansas long grain rice acreage increased by 27.7 percent.

Between 2011 and 2012, U.S. long grain rice harvested acreage was up 13.8 percent and price rose from $13.40 per cwt to $14.50 per cwt., and during the same period Arkansas long grain rice acreage increased by 28.6 percent.

Between 2013 and 2014, U.S. long grain rice harvested acreage was up 24.3 percent, and price declined from $15.40 per cwt to $11.90 per cwt., and during the same period Arkansas long grain rice acreage increased by 33.2 percent.

Between 2015 and 2016, U.S. long grain rice harvested acreage was up 30.0 percent, and price declined from $11.20 per cwt to $9.61 per cwt. and during the same period Arkansas long grain rice acreage increased by 32.4 percent.

 

U.S. Rice Long Grain Rice Harvested Acreage

            Year              US Acreage             Percent Change

  •  2009            2,265,000                                 
  •  2010            2,826,000                    24.8
  •  2011            1,739,000                   -38.5
  •  2012            1,979,000                   13.8 t
  •  2013            1,767,000                   -10.7 
  •  2014            2,196,000                    24.3
  •  2015           1,848,000                     15.8
  •  2016           2,403,000                     30.0
  • 2017            1,748,000                     -27.3

 

Arkansas Rice Long Grain Rice Harvested Acreage

        Year                      Ark. Acreage      Percent Change

  •  2009                     1,245,000           
  • 2010                     1,590,000            27.7
  •  2011                     910,000               -42.8
  • 2012                     1,170,000            28.6
  • 2013                     950,000               -18.8
  •  2014                     1,265,000            33.2
  • 2015                     1,050,000            -17.0
  • 2016                     1,390,000            32.4
  •  2017                     955,000               -31.3

 

What does history tell us?

 If history is a guide, then once again Arkansas rice producers are likely positioned to overplant long grain rice in 2018, believing their greatest profit or least lost is with rice over some alternative combination of soybeans, corn or wheat.

Overproduction is not a problem unique to rice, but quite the opposite. Across most commodities overproduction is chronic, due in large part to the deflationary economic times and a masterful use of technology by most commodity sectors to achieve higher yields and/or production.

 Healthiest Commodity Sectors

 Economically, the healthiest commodity sectors are the ones that have moved aggressively to limit supply or create enough market uncertainty as to be supportive of price, with oil being by far the best example in 2017 going into 2018. To be fair, oil and similar commodity sectors are also the most highly structured and politically active.

 Why the large swings in long grain rice production?

  • In late fall and early winter, when many rice planting decisions are made, all too often, too much emphasis is placed on market signals from the futures market for the next marketing period. Rice has established a cycle of a high production year followed by a low production year, and, granted, weather has played a major role in determining actual harvested acres. Now as we move closer to planting 2018 long grain rice, the 2018 marketing year futures market is increasingly flashing a caution signal implying increasing concern about 2018 U.S. long grain rice over-production.
  •  Collectively, Arkansas producers with assistance from the private and public sector are masters of rice production.
  •  Significant Arkansas farmland resources are presently better suited to a rice and soybeans rotation or soybeans complimenting rice production than soybeans or corn substituting for rice. In coming years, as demand for more Arkansas soybeans and corn production increases, many additional land resources will be developed to easily rotate and adjust to market signals, which will help relieve the tendency to overplant long grain rice. 
  •  Some landowners simply stipulate a certain percent of their land will be planted to rice.   

 Conclusion: Arkansas has 1,928,095 long grain rice base acres and 154,856 medium grain rice base acres or 2,082,951 total base acres. There is no one in the rice market that does not respect Arkansas rice producers’ ability to produce long grain and medium grain rice.

Chronic commodity overproduction is a sign of the deflationary times in commodity sector after commodity sector. This is economically destabilizing for many farms and businesses within each sector, which is just a reality.

Soybeans, corn, and wheat, given global economic stimulative conditions, appear to be in a bottoming and basing process. If 2018 long and medium grain rice harvested acreage and production can remain closely tied to demand, then maybe we can say the same thing about rice, but then just maybe a new demand emerges. I sure hate to rely on hope.  

 

 

DISCLAIMER-FOR-EDUCATIONAL-PURPOSES

 

 

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