Two questions I’m often asked: What is the price outlook for long grain rice? Should I expand my long grain rice acreage in 2009?
From a big picture perspective, the rice market is fundamentally sound with recent price weakness more a function of the economic times than fundamentals. That said, in this economic setting the U.S. long grain rice market could find itself with excess supply in the 2009-10 marketing period if U.S. long grain rice producers expand 2009 acreage and production.
An array of factors impressed me about Arkansas rice producers in 2008, but what impressed me most was that Arkansas rice producers did not overplant. Instead they responded in a businesslike manner to U.S. and global rice market signals and they were rewarded.
Consider the following:
The global financial crisis will remain problematic, recovery will come in time.
2008-09 world rice harvested acreage at 156 million hectares (1 hectare = 2.471 acres) is the largest on record.
2008-09 world rice milled production at 439.7 million metric tons is the largest on record.
2008-09 world rice supplies are adequate with ending stocks of 84.6 million tons, the highest level in the current six marketing periods and up 1.9 million tons from the January estimate and 5.6 million tons above 2007-08.
The six leading rice exporting countries in 2008-09 are projected at record or near record production.
Record rice production is forecast for the major exporting countries of Thailand, India, and Pakistan, with 19.4 million tons of production, 97.5 million tons, and 6.3 million tons respectively.
Vietnam is forecast to harvest a slightly smaller rice crop at 23.5 million tons, and the United States and China have forecast rice production of 6.5 million tons and 135 million tons respectively.
It is fair to say that leaders of all countries around the world remember all too well the scattered 2008 global food riots, tight global rice stocks, and the availability problems. They remember the struggles and economic hardships faced by the worlds’ poor due to excessive rice prices, and you can be sure they will aggressively protect their needy population from any recurrence, especially while the world deals with a massive global slowdown. Exporting, as well as importing, countries will be focused on rice production maintenance.
Rice protectionism in country after country around the world has added to global rice price weakness, but global rice stocks are still tight. Some triggering event like catastrophic weather in the right country could limit global production and move prices significantly higher (for example, U.S. medium grain prices).
U.S. long grain rice production, at 153 million hundredweight, is the fifth largest on record. Many believed that a difficult and extended long grain rice production season would have a more negative impact on USDA’s January production estimate, and a possible impact still exists. The market is still sorting through the uncertainty of the U.S. long grain rice supply issue.
U.S. long grain rice total supply, at 187.3 million hundredweight, is the seventh largest on record.
U.S. long grain rice total use, at 169 million hundredweight, was lowered 3 million hundredweight from the January estimate and is the fourth largest on record.
U.S. long grain rice total exports, at 74 million hundredweight, rank sixth out of the current seven years. U.S. rough rice demand remains fair to good, U.S. milled rice business is being impacted by tight worldwide financials and adequate though tight production in Asia.
Point 1 — Each rice producer should plant his farm production acreage to those crops that he believes will maximize his profits.
Point 2 — Globally rice stocks are being rebuilt in large part due to global economic uncertainty and remembrances of the 2008 food crisis. Will this weaken U.S. long grain milled rice exports for the remainder of this marketing period or beyond?
Point 3 — Globally rice stocks are building, but they remain tight enough that a global event — weather, economic, political, or war — could move rice prices rapidly higher.
Final point — A weakened global economy due to slowing global growth resulting from the global financial crisis has resulted in grain and rice price weakness. Expanding 2009 rice acreage and production in today’s economic setting could further weaken U.S. long grain rice prices.