BRINKLEY, Ark. -- The forecasting business is especially challenging this year due to energy price increases, uncertainty about commodity prices and the lingering impacts of 2005 climatic trauma, said Bobby Coats, Arkansas Extension economist.

“It’s hard to get a handle on where the rice market is headed, because there’s the huge 2005 U.S. rice supply (coupled with) uncertainty about 2006 rice planted acreage,” Coats said at the Arkansas Seed Growers Association meeting in Brinkley, Ark., on Jan. 19. “This has and will lead to pricing opportunities for rice producers.”

In 2005, Arkansas rice producers harvested a record 1.635 million acres of long- and medium-grain rice, a 5.1 percent increase over 2004. The average yield was 148 bushels per acre, below 2004’s record 155 bushels per acre.

Looking at 2005 long-grain rice specifically, Arkansas producers harvested a record 1.533 million acres. There was also a record production of 102 million hundredweight, an 85 percent increase over 1996’s 55 million hundredweight.

Due to improvements in long-grain productivity, Arkansas medium-grain rice acreage was limited to 101,000 acres. “That’s the lowest since 1986’s 84,000 acres.”

“World rice production is the second largest on record and has increased for the third consecutive year,” said Coats, citing supporting data and information for the 2005-06 rice price outlook for the marketing period of Aug. 1, 2005, through July 31, 2006. “Current world rice trade, at 26.1 million tons, is below last year’s 28.3 million tons. That said, world rice trade is still the sixth largest on record.”

World rice ending stocks are dangerously low, said Coats. “They have now declined for the fifth consecutive year. Also, world rice consumption continues to exceed world production. Therefore, declining global stocks coupled with a minor global weather event could create a significant demand for U.S. rice.”

U.S. rice export prices are averaging about $346 per metric ton, while Thai and Vietnamese prices are around $293 and $262 respectively. “This price difference severely limits the U.S. rice producer’s ability to expand exports into the Iraqi and Cuban marketplaces.”

Since 1985, there have been three periods when global economic activity was robust enough to generate strong demand for commodities across the board. The first was a three-year period, from 1988 to 1990. The second period was a four-year period from mid-1994 to mid-1998.

“The third period we’re in presently,” said Coats. “As of Nov. 15, 2005, global economic activity was strong but showing signs of weakness, which implied weakening demand for commodities, especially food commodities. Part of the problem we’ve seen with commodity prices lies with the expectations of slowing global demand.”

Coats presented the same data set from Jan. 10. During the eight-week gap, “Global economic activity strengthened and is as strong as it’s been in the last 20 years, which implies global optimism about the future and strengthening demand for commodities. This is simply one more factor that could add to price strength and a pricing opportunity.”

North American ending rice stocks are the smallest in the last five marketing periods.

“Turning to Latin America — including Central America, the Caribbean and South America — rice consumption exceeds production by 2.2 million tons. And ending stocks are below the previous two marketing periods.”

In East Asia — China, Hong Kong, Japan, South Korea, North Korea, Macau, Mongolia, and Taiwan — rice consumption exceeds production by 8.9 million metric tons. And ending stocks are “seriously, dangerously low.”

In South Asia — Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka, the Maldives — rice production exceeds consumption by 5.9 million metric tons. Ending stocks are slightly above last year, but still the fourth smallest in the current five market periods.

In Southeast Asia — Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Vietnam — rice production exceeds consumption by 9.1 million metric tons. Ending stocks there are the second lowest in the current five marketing periods.

“Brazil is very important. Rice consumption exceeds production by 1.4 million metric tons and ending stocks are down from the previous two marketing periods.” Coats wondered whether neighboring long-grain suppliers will be able to provide Brazil’s rough rice needs.

In China, rice consumption exceeds production by 7.8 million tons. Ending stocks are “seriously low.”

Indian rice production exceeds consumption by 4 million metric tons and ending stocks are the second lowest in the last five marketing periods.

In Thailand, rice production exceeds consumption by 8.4 million metric tons and ending stocks there are the largest in the current five marketing periods.

Vietnam rice production exceeds consumption by 3.5 million tons. Ending stocks are the lowest they’ve been in the last five marketing periods.

Pakistan, a slowly emerging export competitor, has rice production exceeding consumption by 2.7 million tons. That said, ending stocks are the lowest in the current five marketing periods.

The huge foreign market has a “bearish tone. However, fairly normal global weather and the protection rice receives from many major rice-producing countries tends to minimize price risk.”

Long-grain rice production in the United States is the largest on record at 177.5 million hundredweight and total supply is at 211 million hundredweight, also the largest on record. Total exports for 2005-06 long-grain is projected by USDA to be the second largest on record at 97 million hundredweight.

“U.S. long-grain ending stocks are the fourth largest since 1986 at 19.6 million hundredweight.”

USDA is currently estimating domestic and residual use at a record 94.4 million hundredweight.

Coats’ current Arkansas cash price estimate for 2005-2006 long-grain rice is $3.22 per bushel or $7.15 per hundredweight. “This estimate could be on low side, it just depends how high the market has to run to encourage adequate 2006 plantings.”

For medium-grain rice, USDA estimates total 2005-06 production at 45.7 hundredweight and total exports are estimated to be the fourth largest on record at 24 hundredweight. “U.S. ending stocks are estimated at 5.5 hundredweight, which is the smallest since USDA began keeping medium-grain estimates. My current 2005-06 rice price estimate for Arkansas medium grain is $4.28 per bushel or $9.50 per hundredweight.”

Turning to the medium- and long-grain price outlook for the Aug. 1, 2006, to July 31, 2007, marketing period, Coats first pointed at energy. “(Oil) prices have gone from $20 (per barrel) in 1985 to almost $70 last year. As previously stated, the global economy remains strong. Thus, global oil consumption continues to increase — from 60 million barrels daily in 1986 to about 84 million now.

“I expect oil prices will rise in the heavy winter months to around $72 to $75. Next, the potential exists for a pullback in the spring into a $45 to $50 range. Expected strong global economic activity should then push prices back into the $70 to $75 area by late summer, but every day is a new day in the life of the global energy market and time will tell. The point is that I expect the energy market to remain volatile and producers should take advantage of purchasing opportunities.”

Coats’ “best current estimate” for Arkansas’ 2006 total rice production is 1.385 million acres. That would be a 250,000 acre reduction, or a decrease of 15 percent.

“Arkansas long-grain rice acreage, I expect, will be down 300,000 acres to 1.23 million acres — a decrease of 20 percent. Medium-grain acreage should be up to 155,000 acres from 104,000 acres, an increase of 49 percent.”

“Long-grain production I expect to come in at around 85 million hundredweight, a decrease of 16 percent. My current long-grain price estimate for 2006-07 is $3.33 per bushel or $7.40 per hundredweight, which increasingly looks like a low figure, so let’s watch the market and look for pricing opportunities.”

For medium grain, “I expect production to hit 10.7 million hundredweight, a 56 percent increase. Price should be $3.94 per bushel or $8.75 per hundredweight.”

Coats said some bullish market factors could send rice prices higher. Among those factors:

• U.S. planting intentions are very uncertain.

• World rice consumption continues to exceed production.

• World weather event reduces global rice production.

• Continued strong global growth.

• Weak dollar in the 2006-07 marketing period.

• Latin American rice consumption exceeds production.

• Brazilian rice stocks are below the previous two marketing periods.

• Global rice stocks are down for the fifth consecutive year.

“With each passing day the U.S. long-grain rice market looks increasingly bullish. In a normal marketing period with huge U.S. long-grain rice stocks, the expectation would be for some price weakness. Presently, the market seems intent on providing a price that will encourage fairly normal 2006 production, so clearly the present U.S. long-grain price trend is up.”

e-mail: dbennett@prismb2b.com