Rice difficult to analyze with production in over 100 countries I'm not in a position to speak for USDA's statistical data, but I can speak about the dynamics of the rice farm business environment and provide some insight into why the environment has become so difficult to survey, analyze, and forecast.
The U.S. farm business environment and the U.S. rice farm business environment in particular are filled with uncertainty due to the new global economy, farm legislation, a weakened global economy, and trade barriers.
George Will in an article that appeared in the Jan. 1, 2001, issue of the Arkansas Democrat Gazette said about the economy: "There are knowns, known unknowns, and unknown unknowns. That axiom (whose author is unknown) is pertinent to the problem of understanding the economy's trajectory, or at least not misunderstanding it too harmfully."
I would contend that "unknown unknowns" in agriculture exist at a level not experienced in over two generations. For analysts in most sectors of the economy, this dynamic and fluid business environment is extremely difficult to forecast because of the number of participants and the size and complexity of the universe being studied.
In 2000 the NASDAQ had its worst year in its 29-year history. Adam Geller of The Associated Press wrote, "The biggest business story of 2000 was the downfall of the once mighty stock market, a plummet that claimed $3 trillion in investor wealth."
The global economies' robust performance during the first half of the 1990s seemed to promise a new global economy with strengthened demand for U.S. agricultural commodities, which suggested to many that farm legislation by 2003 could transition out of the income support business and maybe even out of providing price support.
The 1996 farm act was written when the global economy was robust and demand for U.S. agricultural commodities was expected to be significantly strong in more years than it would be weak. Few analysts were willing to concede the devastating impact a weakened global economy could have on commodity prices.
The anticipated demand for U.S. agricultural commodities would have cured a lot of problems. If the demand had materialized with stable global growth, we wouldn't even be having this discussion. Unfortunately this demand did not materialize.
Seventeen months after the 1996 farm act became law, the unthinkable happened. Thailand, our major rice export competitor, significantly devalued its currency, making Thai rice cheaper on the export market than U.S. rice. The Asian financial crisis was under way and U.S. rice export competition began to strengthen as a number of our rice export competitors devalued their currency.
The global financial crisis was bearing its own fruit. In 1998, Russia defaulted on its international loans. In 1999, Brazil devalued its currency while some other Latin American countries showed signs of weakness. By Jan. 1, 2000, governments and companies had spent over a $1 trillion trying to sidestep a Y2K disaster. In 2000, interest rates rose instead of falling, thanks to a weakened global economy and a strong dollar; fuel prices rose beyond most analysts' expectations; and low global commodity prices posed the question, "Is a global recession just around the corner?"
The best of the best financial and commodity forecasters from around the world had not anticipated how fast a robust global economy could turn sour. Statisticians, forecasters, and analysts were used to the order or trend that is associated with the old economy and pre-1996 farm legislation, which included supply control of rice, cotton, wheat, and feed grains. Capturing the dynamics of a weakened global economy on each sector of the economy and each commodity has become the order of the day for those working in the private and public statistical community.
Some of the results can be seen in USDA's statistical data.
The problem of weakened global demand for U.S. agricultural products can be seen in the U.S. All Farm Index of Prices Received and Prices Paid. Prices received are 28 percent below prices paid.
With the passage of the 1996 farm act Congress anticipated total direct government payments would decline as the legislation moved toward maturity in 2002; but instead, the payments have increased:
1996 $7.34 billion 1997 $7.50 billion 1998 $12.21 billion 1999 $20.59 billion 2000 $23.29 billion
Rice has been a major beneficiary of the payments.
USDA estimated net cash farm income in 1998 was $55.4 billion with 22 percent coming from the government; in 1999 net cash income was $54.6 billion with 38 percent coming from the government.
In 2000, net cash income was $55.4 billion with 42 percent coming from the government.
Studying and analyzing rice is difficult, because there are approximately 100 countries producing rice and the United States produces only 1.5 percent of global production. 2000-01 world production is estimated at 595.75 million metric tons. The top 11 rice-producing countries are as follows:
1. China 195.00 million metric tons 2. India 132.76 million metric tons 3. Indonesia 53.00 million metric tons 4. Bangladesh 31.95 million metric tons 5. Vietnam 31.36 million metric tons 6. Thailand 25.15 million metric tons 7. Burma 16.90 million metric tons 8. Philippines 12.13 million metric tons 9. Japan 11.84 million metric tons 10. Brazil 10.88 million metric tons 11. United States 8.73 million metric tons
The U.S. and Thai milled rice prices give a good indication of the strength of global rice markets. Unfortunately a weakened global economy is keeping rice trade depressed despite weak prices. Asian prices have dipped to the lowest level since the spring of 1993.
U.S. Thailand Long 100% Grain Grade B 1993/94 $439 $294 1994/95 $314 $290 1995/96 $414 $362 1996/97 $450 $338 1997/98 $415 $302 1998/99 $367 $284 1999/00 $284 $230 2000/01 $267 $190 superscript * superscript *Preliminary
USDA statistics show that global rice trade is being supplied by an increasingly larger share of foreign rice, particularly rice sourced from Thailand, Vietnam, and China. In 2001, U.S. exports are projected at 2.75 million tons, unchanged from 2000 and down 9 percent from the volume exported 20 years earlier. In 2001, China, Thailand, and Vietnam together are projected to export 13.8 million tons, up 13 percent from 2000 and an increase of nearly four-fold since 1981.
The U.S. trade share has dipped from a high of 25 percent in 1981 to a low of only 11.2 percent projected for 2001. The combined share for China, Thailand, and Vietnam is the converse of the U.S. growing from 29.6 percent in 1981 to 57 percent projected for 2001.
Rice is a difficult commodity to analyze because on the one hand, U.S. rice producers only produce 1.5 percent of global production, and on the other hand, over 100 countries produce rice. In a global economy where freedom of entry will increasingly exist and the low cost producer survives, I believe that we will subsequently find that neither producer nor country representatives feel compelled to provide any more information than is absolutely necessary.
The new global economy will be as challenging for the statistician as the farmer. It will be filled with a full array of emotions from extreme highs to extreme lows.