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Riceland reports year of record receipts

Co-op's Richard Bell says sales and revenues down, however Riceland's story for the past year is one of record receipts, says Riceland head Richard Bell. "We received 123.7 million bushels - 91.4 million bushels of rough rice and 32.3 million bushels of soybeans and wheat. Our sales and revenues were down a bit to $768 million. We've been running about $800 million, so we're down about 6 percent. This drop is entirely related to lower prices for commodities," he said at the annual Riceland meeting in Stuttgart on Nov. 16.

"All the reports I've seen on other similar ag companies also had declining revenues. I always say that isn't what counts, though. What counts is what the returns are. In those numbers, we had $546.4 million of rice - our second highest amount next to last year."

Bell says Riceland introduced a new accounting method to measure earnings.

The top customer list of 1999-2000 shows a striking thing, says Bell. Of the top three (Tyson Foods, Anheuser Busch, and Wal-Mart Stores), two are in northwest Arkansas.

"That reflects the growth in northwest Arkansas. Of the top 10 customers, none are more than 5 percent of Riceland's total business. I think it's good to have wide distribution and not be captive to one group."

Riceland had what Bell describes as a "banner year" in rice marketing. Riceland sold 2.5 billion pounds of rice - up 4 percent from the previous year, was a major player in the rough rice market, and was active in rice futures trading.

"In fact, many times we account for 30 to 40 percent of the open interest in rice futures trading in Chicago."

Bell says that for some time, the strategy has been to aggressively approach the domestic market.

"It's growing, exports are limited and so we're going after the domestic market. We limit our export sales to higher-value markets - Western Europe, Saudi Arabia, South Africa and the Caribbean."

Rice fits today's lifestyles, says Bell. National per capita consumption of rice has increased 60 percent during the past decade. That's more than all other grain-based foods.

"I find that interesting in regards to corn when you think about the popularity and openings of all the Tex-Mex restaurants that have been built over the last decade."

This past year, 75 percent of all Riceland rice sales were to the domestic market. That compares with 50 percent sales domestically only five years ago.

Bell also points out that one of the fastest-growing areas for rice sales is in pet foods. Three of Riceland's top dozen rice customers are pet food companies.

"One of the most impressive things from this year has been rice flour. We've become the national leader in rice flour. The major customers include those who make baby foods.

"Our volume for rice flour was up 31 percent, sales were up 13 percent, and we have record earnings. Per-unit expenses are down 14 percent from the previous year and down 26 percent from two years ago."

Riceland's national marketing shares for rice were 25 percent of the rice sold in the United States. The company had 30 percent of the Southern marketings (46 percent of Southern medium grain), and 28 percent of the national long grain rice.

Soybeans Riceland's soybean-processing business became a struggle a year ago, says Bell. It was a struggle the first half of this year and then improved later when people began taking out some capacity and quit running at full speed.

"We still have over-capacity, however, and have intense competition from South America - mainly from Brazil, Argentina and Paraguay.

"But it did get better. As a result, Riceland earned 6 cents per bushel run through the soybean plant. My goal was simply to break even, so we did better. While the 6 cents is low historically, we did double the 3 cents per bushel from the previous year."

Riceland had a great year in edible oil marketing. Business was up 7 percent, package business was up 10 percent and a sales record was set with Sam's Wholesale Clubs.

"I love when they put in a new Sam's. It's a little like `Field of Dreams' - if you build it, they will come. We've been riding along with Wal-Mart with this for about six years."

One area Riceland continues to struggle in - "which at one time was our star" - is the soy lecithin business. Bell says this is mainly due to the GMO (genetically modified organism) issue in Europe. At one time Europe was about half Riceland's lecithin market. But they no longer want any GMO products, and "we've had trouble sourcing lecithin from non-GMO sources. We're struggling along and hoping for a better day."

Wheat "We had no space to store the 1999 crop. We had to ship all our wheat at the start of rice harvest. That usually means a loss, but our marketing staff did an excellent job and we made a little money. The seasonal pool was actually competitive with people who did their own marketing. We were fortunate to have dodged a bullet there."

Grain dryers "The dryers had a record year in 1999-2000. Volume was up 15 percent and per-unit expenses were down 6 percent from the previous year and 15 percent from two years ago."

Outlooks RICE: "We have smaller U.S. and world crops this year. But world supplies continue to be large - particularly in Asia. We do think there will be a larger world trade in rice but it will come at very weak world prices."

Looking at production, the South was down 12 percent in rice production, California was up 19 percent and the United States was down 7 percent overall.

For the states Riceland serves, Arkansas production is down 10 percent, Louisiana is down 20 percent, Mississippi is down 28 percent, Missouri is up slightly, and Texas is up 2 percent. Riceland numbers show the Mid-South is down about 12 percent overall.

In the United States, long grain rice supply is down 14 percent and medium grain (lots from California) is up 16 percent.

"To me, one of the main stories in the past year was the world price. Per bushel, long grain has come down from $3.61 in 1998 to $1.57 this year. Medium grain in 1998 was $3.37 per bushel and is now $1.52.

"We haven't seen prices this low since the mid-1980s, when the marketing loan program was put in. Frankly, we don't see prices changing any time soon."

There was some new legislation passed by Congress before the elections. Growers now have access to Cuba, Iran, Iraq and North Korea with some caveats. Cuba is the one talked about most. What has Bell seen there?

"I spent the third week of September in Cuba and couldn't have had a better reception from the people who do the buying down there. I thought we'd be on a roll if we could just get the legislation passed eliminating food and medicine from the embargo. We did that. But in the end, politicians from south Florida stuck in a provision about traveling restrictions. That irritated the Cubans to the degree that it's now questionable as to whether any sales will go through any time soon.

"I think it behooves us - when Congress comes back - to get our representatives to pass new legislation taking out those travel restrictions."

The country that offers the most opportunity is Iran, says Bell. It's a big rice importer that likes long-grain rice. "They've not been willing to buy from us even though we keep meeting with them. That's primarily because our government keeps calling them terrorists. They don't like that, I guess. I hope we can work our way through that."

SOYBEANS: "In Arkansas, we had a variable crop - small beans and poor quality in places. I hate to say it, but we have another record South American crop possible and the world is awash in palm oil."

In terms of prices, it doesn't look good, says Bell. "The loan rate in Arkansas is normally $5.40. USDA is looking like it will come up with $4.70 or thereabouts. The point is, it'll be loan economics once again with the LDP."

WHEAT: "The wheat outlook is a little surprising. A smaller world crop will be seen in 2000-01. Frankly, however, price recovery has been slow. I think that's because soft red prices are tied to corn.

"We need something big to happen. We need China to place a big order or something to get wheat out of the doldrums."

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