“As far as I’m concerned, I wish the 2000-01 year would just go away. We should just get through it and get on to the next one. We had soaring natural gas prices, petroleum factors, difficult marketing decisions, low prices, and poor margins. We had a huge California rice crop preceded by a smaller one. And we ended up with a trashy soybean crop,” says Bell, Riceland CEO, who spoke at the annual Riceland meeting in Stuttgart, Ark.
For the year, there were three goals Bell wanted to focus on: Competitive seasonal pool payments, avoid losses in taxable business and protect the balance sheet. All were accomplished, he says.
There were highlights for the year. Among them:
— The wheat-marketing program. “We did extremely well with the wheat marketing program. Wheat has become an important crop.
— It was another good year for rice flour.
— Soybean crush management. “It was a difficult early because there were no margins at all. It took a lot of strong management with crush margins in Chicago but the ending numbers were good.”
— Bell says one of the key highlights of the year involves Riceland’s outreach efforts to Cuba. During the last 18 months, company representatives have made eight trips into Havana. The goal has been to get down there, meet the people and get ready for the day when American rice can be shipped into the country.
— While some Americans continue to complain about dealing with Fidel Castro, it seems Riceland’s efforts are finally bearing fruit.
“(On Nov. 14), we got a fax from the Cuban trade organization saying they’re ready to buy rice in the next 10 to 14 days. This isn’t because of the recent flooding there. The United States offered Cuba food to help them through that. Castro came back and said he wanted nothing free but he would buy from us.
“Of course, this is what we’ve been hoping he’d do – come out and say he’d be willing to buy from us. Legislation passed last year has many hoops to jump through but we think it still allows us access to the Cuban market. Thus far, Castro has refused us access, though.”
But as of Nov. 14, Bell says Riceland was told the two governments had worked it out and “we could sell them 20,000 tons of rice. They want it within the next couple of weeks. I see this as a major breakthrough that we’ve been working towards for two years.”
Another highlight is the rice expansion in Wal-Mart Supercenters. This past year volume was up 36 percent compared to the previous year.
“Wal-Mart is going in to areas where we’re strong like Chicago and Wisconsin. The more stores they build, the more volume we get. This is a significant development for us.”
Along with highlights, there were some major challenges, says Bell. One of those was the medium grain market. As the year began, a major brewery that uses medium grain rice put a limitation on Bengal southern medium grain. They claim that a tenth of the time the variety has a lilac bouquet.
“I’ve never been able to smell that, but they claim it’s there.”
Medium grain stocks also went up because California had a huge crop. At the end of the year, the West Coast end-of-year stocks were up 68 percent over the previous year. Stocks in the southern Rice Belt were up 29 percent for a weighted average of 55 percent.
“I will say that if you look at the numbers, medium grain production is down 21 percent over a year earlier. That’s because Arkansans went back to long grain because of the poor market and the large California crop. That helps explain the 26 percent increase in long grain.”
Challenges were also seen in edible oils (including rice oil); soy lecithin — “because Europe won’t accept GMO’s so we’ve been pushed out of that market; white rice milling margins aren’t doing as well as they did the previous year; and energy co-generation.
Regarding the outlook, Bell sees some things that are promising. There are improved soybean processing margins — 25 cents per bushel better than a year ago. Rice milling margins for white rice have improved — “partly due to lower prices for raw material.” Bell is also seeing edible oils beginning to do better. Soybean quality is up, there are lower natural gas prices and the drought in Central America has helped U.S. farmers and companies.
The challenges for the coming year include the fact that the “overwhelming rice crop was, well, overwhelming. Insect damage to both rice and soybeans has caused trouble. The stinkbug is a key pest and will have an impact on our ability to market. I think some people were caught off guard by the pest and others thought they’d get by without spraying.”
“With crop receipts, we expect to end up with 127.9 million bushels (95.1 million bushels of dry rough rice, 22.1 million bushels of soybeans and 10.7 million bushels of wheat). That’s a record. When you look at it, the total isn’t that much bigger than a year ago. But the speed it came in at was the problem.
“People kept asking us, ‘didn’t you plan on this? Didn’t you know this would happen?’ the answer is yes. But we had no idea it would come in with such speed.”
Despite everything, Bell feels Riceland is basically where it should be. The rice-marketing plan is on schedule for milling. There’s an adequate soybean supply for processing plants and the wheat-marketing plan is also intact, he says.
Regarding farm legislation, Bell says he’s pleased with the House farm bill — “if I’d written it, that’s what it would have looked like. The House farm bill has a lot of things we want: a marketing loan benefit, a fixed income payment, a counter-cyclical payment, a three-entity rule, and payment limits.”
Bell isn’t as keen on the Senate version. Despite working feverishly, Riceland has thus far been unable to help come up with a bipartisan agreement.
“The Republican side of the Senate, we figured, could come up with something that could be supported by Sen. Blanche Lincoln, D-Ark., and Sen. Zell Miller, D-Ga. But that hasn’t happened because Sen. Thad Cochran, R-Miss., — who I have a lot of faith in — thus far hasn’t been able to get all the Republicans on board including Sen. Richard Lugar, R-Ind.
“Our basic strategy is to make sure something gets out before this session of Congress ends in order to preserve the money that’s been budgeted. If that doesn’t happen, we’ll have to go back to the budgeting process.”
In terms of the price outlook, there’s not a lot that gives Bell much hope because there’s a huge world rice crop. But Bell points to a tremendous consumption basis as reason for optimism.
“When you look at world stocks, they aren’t terribly burdensome. World production is actually going down, it just isn’t going down fast enough. If you look at projected ending world stocks for next summer, in every case but soybeans, ending stocks are on the decline. What that says is that despite big production, we’re consuming what’s being produced. I think our marketing loan program has helped drive that. All it would take is some event — some weather problem perhaps — and the rice situation would turn around.”