The United States could see a rebound in U.S. rice acreage in 2007-08, with increases coming primarily in California, Missouri and Louisiana, according to a USDA economist, speaking at the USA Rice Outlook Conference in Las Vegas.
Nathan Childs, senior rice market analyst, USDA's Economic Research Service, said, “California should come back strong.
“Going into the spring of 2006, the cold, wet spring didn't allow much of a comeback. California will account for a huge percentage of the increase in area.
“Louisiana suffered through saltwater intrusion and hurricanes and hopefully that will be resolved, although high fuel and fertilizer prices continue to hurt Louisiana farmers.
“Missouri has had record area almost every year. They'll pick up a few thousand acres.”
Childs did not provide a figure on the amount of the increase, noting that the first USDA forecast for the 2007-08 rice crop will be released in May 2007.
For the 2007-08 U.S. crop, assuming normal weather worldwide and a continuation of current policies, Childs projects higher per acre input costs, larger plantings and a higher average yield, smaller carry-in, record imports, larger production, greater total supplies, larger total domestic and residual use, an increase in exports (especially for milled rice), smaller carry-out, higher global prices and little change in the U.S. season average farm price.
Meanwhile, global production for last year's crop is now projected to be the largest on record with bigger crops in China, Vietnam, Bangladesh, Indonesia and Sub-Saharan Africa, and smaller crops for the United States, Australia, both Koreas and Japan.
Global supplies are up almost 1 percent in 2006-07, according to Childs. World trade in 2007 is expected to hold steady at 28 million tons. Childs explained that smaller Asian imports offset stronger Sub-Saharan African and Latin American imports, while weaker exports from the United States, Vietnam and China offset larger Thailand and Indian shipments.
World stocks will come down about 2 percent, and the world will have the lowest stocks-to-use ratio since the early 1980s.
Childs says a big obstacle holding back world trade “has been the lack of big imports from Indonesia. In the 1970s, Indonesia comprised 25 percent of the global trade. Indonesia went for self-sufficiency, achieved it briefly in the mid-1980s, then came back on the market as a major buyer. Indonesia has had bumper crops for several years. But we project that they cannot maintain this self sufficiency and will be back in the market.”
Without a trend toward higher trade, prices will have a hard time rising, noted Childs.
Bullish factors on the long grain sector of the rice market include high fuel and fertilizer prices, a tighter supply situation in Vietnam and the United States, Thailand's 2006-07 intervention purchases and a decline in global stocks.
Bearish factors include much weaker import demand from the Philippines, Indonesia and Bangladesh due to record or near-record crops and bumper crops projected for three of the top five exporters: “Thailand, Vietnam and Pakistan. Pakistan has had incredible increases in its production recently. They are not a rice-based economy so they've been able to export much of that production.”
Bullish factors on the medium grain sector include severe drought reducing the current Australian crop, a second consecutive year of below-normal crops in California, increased imports by South Korea and high fuel and fertilizer prices.
Bearish factors include Turkey's import restrictions, flat imports for Japan and Taiwan and little growth in other markets.
The U.S. price difference over Thailand has grown sharply in the last year and a half and now exceeds $130 a ton, according to Childs. “That's a very high price differential and the markets are very price sensitive. As we are all well aware, the United States is not selling rice to the EU. The loss of the EU market means other markets must absorb that rice. That's a very big price difference to be moving rice into typically lower income markets.”
Childs projects larger total domestic and residual use for U.S. rice for 2006-07, a 16 percent drop in total U.S. rice exports, a 24 percent drop in milled rice exports, with rough rice exports up, and a 20 percent smaller carryout. Domestic prices are expected to be much higher, from $7 per hundredweight to $9 to $9.50 per hundredweight, and a world price above the loan rate.
“However, while prices are high, there's not a lot of rice moving at that price. So that's a mixed bag.”
Factors which affected domestic production in 2006-07 included higher fuel and fertilizer costs, expectations of no LDP, difficulty acquiring bank loans, a cold wet spring that limited California planting and the largest carry-in since 1987-88.
On the demand side, the GE issue continues to weaken long grain exports to the EU-25, “and those are not going to be fully offset by increased shipments to other markets, primarily Latin America and the Middle East.”
The 2006 U.S. rice crop is projected at 193.3 million hundredweight, with Arkansas and Louisiana accounting for most of the decline. Louisiana had its smallest rice area since 1914, according to Childs.