Weather-related planting delays in Panama could increase export opportunities for the United States, and higher export numbers could translate into higher rice prices for U.S. producers, according to market analysts.
Soggy conditions and a government request to delay planting until soils begin to dry are expected to delay Panama's rice harvest by about two months. These weather-related planting delays in Panama could result in as much as 50,000 metric tons of rice being imported into the country to satisfy demand until an anticipated October harvest, the USA Rice Federation reports.
Industry insiders expect that much, if not all, of the rice needed to meet short-term demand in Panama will be sourced from the United States.
“Panama will probably have to import 20 to 30 percent of its annual consumption as a stop gap measure,” says Darren Hudson, agricultural economist at Mississippi State University in Starkville, Miss.
While Panama is a relatively small country, its 3 million citizens each consume a staggering 155 pounds of rice annually. In a normal year, Panamanian rice growers produce enough rice to fill 90 percent of that need, estimated at 280,000 metric tons.
“In a typical year we wouldn't export an abundant amount of rice to Panama, so delayed planting could mean a big up-tick in the United States' relative exports to Panama,” says Hudson. “While our export potential, and its impact on prices, isn't substantial, it will help draw down U.S. rice stocks. That, in turn, could improve rice prices for U.S. growers.
“This situation, however, is quite different than if we were talking about China, which would mean a huge boon for rice prices.”
Several trade-related sources have indicated that the government of Panama may issue “extraordinary import licenses” for 50,000 metric tons of rice to cover the expected shortfall. Import quotas limit the quantity of a product that can be imported into a country from any one other country.
An extraordinary import license, Hudson says, grants permission to a country to import a product, such as rice, in specified amounts above the normal quota.
While unofficial imports of milled rice from neighboring Costa Rica at below-market prices could somewhat limit the United State's export potential under an extraordinary import quota, Hudson says the effect on official imports into Panama would be minimal.
Costa Rica may indeed be bypassing its official quota with on-the-side trading for the purpose of gaining marketshare, but its ability to supply rice to Panama remains limited.
“The bottom line is that if undesirable planting conditions persist in Panama, even with unofficial side trading, you are going to see increased rice imports into Panama,” Hudson says. “If the situation becomes more desperate, there is no way Costa Rica can source the amount of rice Panama will require to meet domestic demand. The United States does have the ability to source the potential need for rice, though.”
If crop conditions drastically improve in Panama, the short-term need for rice imports will dry up, Hudson say. “How large the bump is for imports hinges on the final demand for imported rice.”
According to USDA's March 31 Prospective Plantings Report, 2003 U.S. rice acreage is expected to fall to 3.04 million acres, a decrease of 6 percent from 2002, and 9 percent less than 2001 plantings. Meanwhile, U.S. rice exports for the 2002-03 marketing year are up 28 percent over a year earlier, with more than 3.2 million tons in exports and sales commitments secured to this point.