Low prices have come on the wave of a 12 percent increase in total U.S. rice production since 1999 which includes a “tremendous increase (28 percent) in long grain rice production and a decrease of 23 percent in medium grain production.”
The higher production is due to both an increase in U.S. rice acreage – with much of the expansion occurring in the Mid-South – and significant improvements in yield over the last few years, Kennedy said in a speech to the Arkansas Crop Management Conference in Little Rock.
“Last year, we saw some record yields,” Kennedy said. “With some of the new varieties we’ve been seeing, production improvements, land leveling, I expect we will continue to see aggressive growth in our yield curve.”
Bumper rice crops pushed ending stocks for U.S. rice this year from 29 million cwt. to 43 million cwt. And the buildup in stocks is reflected in falling prices, which have dropped from $9.96 per hundredweight in 1998 to current levels of below $4 per hundredweight.
World supplies are up too, Kennedy noted. “There’s plenty of rice everywhere you look. It’s going to take some significant things to happen in the world’s rice growing region to change our current price scenario.”
A silver lining of sorts in the gloomy outlook “is that for first time in a long time, the United States is competitive in the world market for prices.
“The spread between U.S. rice and Thai rice prices on a milled basis has decreased from $101 to $24 on a metric ton basis. So our pricing is better than it’s been in a couple of years. The stage is set for us to get some export markets.
“The problem is that our currency’s strength is still creating problems for us. So even though we’re finally getting our prices in line and should be getting some access to some world markets, it’s not happening as fast as we’d like it to.”
While current farm bill proposals don’t contain mechanisms to address the oversupply situations that exist in many commodities, “I don’t think backing up is the answer,” Kennedy said. “We need a farm bill that will allow us to create our markets.
“History will tell you that every market that we walked away from, when we come back 10 years later or 40 years later, we learn that other countries were glad to take that business and had done a good job of serving that customer. Opening the Iran, Iraq and Cuba markets could have huge impact on our trade.”
Another factor impacting producer return in 2001 was damage caused by stinkbug, noted Kennedy. “We figure it cost Arkansas rice producers about $30 million last year, which averages out to be about 30 cents per cwt. or $18 an acre. Treatment costs cost between $6 and $12 an acre. So economically, it makes sense to treat the problem.”
The insect has moved from being an isolated, regional pest to an area-wide one, Kennedy noted. “As we moved into the 2001 crop, we found that we had damage from the south end of the rice-growing region all the way up.”
Kennedy says the emergence of the pest could be due to earlier-maturing rice crops, “and a stinkbug life cycle that is aligned with the life cycle of the crop in such a way to cause the most damage to the crop.”
In addition, “When farm economics are tough, we end up with more untreated ditch banks and fence rows and it creates a habitat for the insects to overwinter in. Also, when we’re no-tilling, we leave more residue, which gives the bugs more area to overwinter in.”
Producers who did scout and treat the pest in 2001 didn’t always have success, he noted. “So it’s an interesting phenomenon. The keys are going to be to scout, scout often and communicate about any populations coming on. But it’s a problem that clearly should be solved in the field and not in rice mills.”
The pest leaves very visible damage to the grain – cracking and discoloration – where it attacks, “so it’s very hard to blend it out. The problem pushes rice into by-product sales or dog food sales. It’s not going to one of our higher-grade customers.
It’s a problem for the mill, too, he said. “It slows down the process. And when you slow down the mills, you increase per unit costs. And when you do that, you’re losing profitability.”