It's going to take a while for the United States to work off its large rice stocks and begin to push prices up from a 15-year low, according to a USDA rice analyst.
“For the second year in a row, the United States has record total supplies and a second year in a row of a bumper crop — 212 million cwt., compared to 213 million cwt. last year,” said Nathan Childs, with USDA's Economic Research Service.
As a result, huge beginning stocks of 39 million cwt. are projected for next year. This comes despite projected record U.S. exports in 2002-03 of around 100 million cwt., including to Brazil and Cuba. The latter was virtually out of the market for 40 years and now has imported about 100,000 tons of rice.
Exports of rough rice are projected at a record 35 million cwt., most going to Mexico and Central America. Both have imported rice in record numbers for two years in a row. There is a projected small increase in milled rice exports, according to Childs, “but the United States continues to lose share in the Middle East and Sub-Saharan Africa market.”
But record U.S. exports aren't enough to whittle down supply significantly. “The United States will have a record supply, low prices and another big carryout,” the analyst said. “So it's going to take a while to work off these very large stocks.”
In the meantime “we have the lowest season average farm price (around $3.85) since 1986-87.” This is the sixth consecutive year of a declining farm price for rice.
One price-depressing factor is the large exportable supply of rice in the world market. “There's nothing really moving trading prices higher,” Childs said. “And India is subsidizing exports at a tremendous rate.”
India's estimated rice exports of 6.5 million tons, a record, was largely due to those subsidies, according to Childs. “We have plenty of exportable supplies in Asia, Vietnam, Burma, China.”
Despite low prices, the United States had only a 3 percent drop in acreage in 2002. But increasing yields have tended to offset the reductions somewhat. “We have the third consecutive year of a record to near-record yield, three back to back years of over 6,000 pounds per acre. That was very rare in the past. The adoption of new varieties in the South, all long-grain, that are yielding much higher than in previous years brings in a lot of production, even with declining area.”
In addition, there are not a lot of viable planting options for a lot of rice producers. Rice remains the best planting option, despite low prices.
Childs noted that the domestic market for rice continues to grow, albeit at a slower rate. “Per capita growth for rice consumption in the mid-1980s was about a pound of rice per year, but it's slowed down to a half a pound a year now.”
On the other hand, “If I subtracted pet food and imports from the per capita number, per capita growth in rice consumption would probably flatten.”
Childs pointed out that rice prices rose to around $10 per cwt. in 1997-98 due to the yield-reducing effects of El Niño in southeast Asia, Indonesia, the Philippines and South America. “Since then, prices have steady declined as markets have adjusted. Importing countries have increased area, yield and production. That tight supply situation did not last for very long.”
Low prices and other factors have had a huge negative impact on Texas rice production, noted Childs.
Texas was the largest rice-growing state in the United States for many years. In the mid-1970s, acreage shifted to the Delta, beginning Arkansas' rapid movement into the No. 1 rice-growing state.