Rice is in increasingly short supply and foreign governments aretaking steps to insure the diet staple remains available to theirpopulations.
"I want to get down to where the rubber meets the road,particularly for the rice and the fundamentals affecting us,"said Carl Brothers, senior vice president, international rice andpartnerships, Riceland Foods, Inc.
Enhanced Coverage LinkingRiceland Foods, Inc. -Search using:
News, Most Recent 60 Days
"The world rice supply/use has beginning stocks for2007-08 at 75 million metric tons. Production is at 421 millionmetric tons and imports are at 28 million metric tons. That means atotal supply of 524 million metric tons."
Looking at use against supply, domestic use is at 423 millionmetric tons and exports at 29 million -- over the past 27years, trade has increased three-fold. Total use will be 452million metric tons. That means ending stocks of 72 million metrictons.
"That ending stock number may not mean a lot toyou," said Brothers at the Arkansas State UniversityAgribusiness Conference in Jonesboro, Ark., on Feb. 13. "Butnotice it's come down (3 million metric tons) from 2006-07.It has steadily declined over the last several years.
"In 1995-96, the high point was 35.5 percent stocks-to-useratio. We're now down to 16 percent."
There's been a reaction to this situation -- "abuilding perfect storm," says Brothers. Vietnam bannedexports last year and is just now beginning to quote and considershipping again. India put in a minimum export price, which, ineffect, banned exports. Egypt recently banned exports, as didGuyana. China has increased domestic support and has put on exportduties. Previously, China had an export subsidy.
"All of this has us concerned over carryover stocks andwhat's happening in world markets."
The U.S. rice supply/demand numbers needs some explanation. In2006-07, the carry-in came in at 95 million bushels. However, USDAhad carried an estimate of 75 million bushels. That 20 millionbushel swing "really upset the market price ... it had animpact on the futures market and I was asked by many people,'How can (the numbers) be so far off?'"
Forward into 2007-08, the USDA carry-in estimate was 93 millionbushels. The stocks actually came in at 87 million bushels."So in that case, the USDA did a much better job...
"Regardless, we carried 87 million bushels into the newyear, down 8 percent from the previous year. Production was upslightly at 440 million bushels (from 430 million). Imports grewfrom 46 million bushels to 48 million. Total supply is at 575million bushels.
"Domestic use for 2007-08 came in at 277 million bushels(4 million less than the previous year)."
Up some 22 percent over 2006-07, "exports are where theaction is. We really got out of the gate fast."
The 2007-08 total rice use was up 8 percent, but the carryoutwas down 41 percent over the previous year. Also, the average farmprice rose from $4.48 per bushel to USDA's mid-range estimateof $5.15.
How do long-grain versus medium-grain numbers break down?"For 2007-08, carry-in for long-grain is down 14 percent froma year ago. Production is down from 325 million bushels to 316million bushels. Imports are up from 31 million bushels to 34million. That leaves a total supply down 4 percent at 413 millionbushels."
Looking at that supply against use, domestic use is down from204 million bushels to 198 million. Exports are up 18 percent to191 million bushels. Total use is up 6 percent to 389 millionbushels. "All that pulls the carryout down 62 percent --from 63 million bushels to 24 million."
As for medium-grain, there's a different story. "Infact, looking at the picture, you might think it's bearishcompared to long-grain. But there are some good thingshappening."
The 2007-08 medium-grain carry-in was 22 million bushels (up 1million from 2006-07). Production was up 16 percent (to 123 millionbushels) and most of that increase was in Arkansas. The state wentfrom 106,000 (medium-grain) acres to 146,000 acres.
"I think that was somewhat driven by seed supply,particularly with the situation (where several rice varieties werefound to harbor a GM trait). Also, there were some contracts madewith cereal manufacturers."
Medium-grain imports were unchanged at 14 million bushels. The2007-08 total supply was up 13 percent at 159 million bushels.Domestic use was nearly unchanged. However, exports were up 31percent (at 55 million bushels) and total use was up 13 percent (at134 million bushels). Carryout was up 14 percent at 25 millionbushels.
"I'd normally say these numbers are a bitconcerning. But Australia has a drought and has had for seven yearsrunning. Australians have actually been in the United States tryingto buy rice, not only to feed their own people but also to takecare of the business they've built over the year. They hopeone day to have rain and get back into rice production. Australiais a key competitor, particularly for California-grownmedium-grain.
Egypt, which has an export ban, is another key medium-graincompetitor.
"As for China, who knows what it will do? But it appearsto me they'll stay in a pullback mode. They're takingaction to ensure rice isn't leaving the country until theyfeed their own people."
Rice stock numbers came out on Jan. 11. Long-grain came in"as expected," down about 5 percent (at 230 millionbushels). However, going back to the 2005 number (277 millionbushels), the latest number is down 47 million bushels from thathigh. Medium-grain stocks are up 16 percent (at 106 millionbushels).
Every week any company exports rice from America it must reportthat to FAS. Those reports are compiled and published.
"Exports got out of the gate extremely fast early thisyear and they've stayed fast. Between milled and rough,long-grain export sales are up 24 percent. Medium-grain is up 22percent. Combined, export sales are up 23 percent."
What about U.S. rice export shipments? Comparing 2006 and 2007,"you can see long-grain is up 14 percent and medium-grain isup 6 percent. Overall, shipments are up 12 percent."
So, sales are up 23 percent while shipments are up only 12percent. That gap leaves Brothers mulling several possibilities.One, much rice has been forward-priced. Two, there's a lot ofrice yet to be priced. Or, three, there's a combination ofthe first two.
Key Markets
Haiti is a very important market for the United States. Haitiansconsume a lot of rice and lately have been complaining about risingrice prices.
"The big concern among those we work with in Haiti is thegovernment will ... take actions that could be detrimental tothe import of rice. We hope that isn't true because, as youlook around the world, the price of U.S. rice isn't muchdifferent from anywhere else in the world."
Meanwhile, Iraq hasn't bought U.S. rice for severalmonths. There was a tender in the last two weeks.
"I was told twice yesterday (Feb. 12), that Iraqwouldn't buy U.S. rice at this time. One report was Iraqishad bought 50,000 tons of Thai rice and 50,000 tons of Vietnameserice. That could be the first sign that prices are beginning toration demand."
The news is better from Saudi Arabia. "India produces'thermal' rice -- a low-quality parboil. WithIndia pulling back, (the United States) is one of the few sourcesof parboil rice. Business with Saudi Arabia is up and I thinkwe'll end up with a gain on the year."
The European Union will be harder to crack. "We'vehad a difficult time with the European market and the(aforementioned GM seed issue) that occurred. I was part of a groupthat went to the EU in December and met in Brussels to convincethem of the effort and success we'd had (in removing the GMtrait) and encourage them to lift the emergency measuresthey'd put in place."
While Brothers and colleagues were returning home, the EU agreedto lift the emergency measures. That is supposed to go into effectin the next 30 days. But don't get too excited, warnedBrothers. "All we did was get the emergency measures lifted.That doesn't mean the member states can't continue totest and continue to give us problems."
The other thing happening with the EU concerns the shippingservice called LASH (Lighter Aboard SHip). The service involvessmall barges -- about 385 tons. Those are loaded in the UnitedStates and remain intact to their destination. That allows rice tobe identity-preserved all the way through the shipping process.
Unfortunately, the containers have been pulled out of service."They were worth more as scrap steel. That means we stillhave a lot of work to do with the EU and I believe current exportlevels will decline because of the loss of the LASHshipments."
Cuba is "always of interest" to U.S. producers. Ithas bought no rice from the United States so far this year.
"I don't see them importing U.S. rice unlessthere's an interruption in the supply from Vietnam.They're very close to Vietnam and the Vietnamese give themcredit terms. The prices out of Vietnam have been considerablycheaper."
June report
Riceland officials have been meeting regularly with theUSDA's National Agriculture Statistics Service."We've been talking about what we can do to improve thereports and have convinced them of the need for a June 1report."
Reports now come out on Dec. 1, March 1, June 1 and Aug. 1.
"It (used to be) a long stretch between March 1 and August1. Our concern was a lot of rice on the farm was being missed. Iftrue, at least by having the June 1 report, we'll pick upthat business quicker and not have a surprise on Aug. 1."
There's a lot of confusion about the stocks report, saidBrothers. "When a farmer is called, he may have sold the ricein his bin, but he's to report that rice as his stock.Ownership doesn't matter -- if it's in yourassets, you must report it. That's true whether you'rea farmer, mill or warehouse."
WTO
Shortly before the ASU conference, Brothers met with SusanSchwab, U.S. trade ambassador. "She said there's stilla tremendous amount of work to do. We don't have it framed upthe way it needs to be. And there's maybe two months to get(the framework) done. If we don't make serious progress bythen, she doesn't believe there will be an agreement.
"I'm not sure that's bad news. My biggestconcern is the (Bush) administration reaches some agreement thathas no benefit for rice. We were left out of the Korean free tradeagreement, if you'll remember."
Farm bill
Regarding the farm bill, Brothers said he knew "right outof the gate we'd be in trouble with the three-entity rule.Direct and counter-cyclical payments came out fairly well. Themarketing loan benefits are unlimited but, for the most, that wastrue of the 2002 bill, as well.
"I thought (the House and Senate proposals) looked prettygood, that it could go to conference and if it came out close withall that's going on -- wars, budget, economy --that it would be a pretty good farm bill."
However, Brother's original optimism has dimmed."What I heard in D.C. on Monday (Feb. 11) was that (HouseAgriculture Committee Chairman) Peterson is talking to the (Bush)administration about a totally different package. I don'tthink in my career at Riceland I've ever seen this happen.For that reason, I don't know where we're going and Idon't think anyone else does."
2008 rice regulations
The Arkansas State Plant Board has ruled that Cheniere (tracingback to the 2003 foundation class from LSU) and Clearfield 131(tracing back to registered or certified classes produced in 2005,2006, or 2007) shall not be sold, planted or handled in 2008 (formore, seehttp://deltafarmpress.com/mag/farming_arkansas_rice_seed/index.html).
"(Growers) need to be aware of that. Now, other certifiedcrops of Cheniere or Clearfield 131 that have (cleared testing) maybe planted. That's a bit different than last year.
"I will tell you that Riceland -- and I suspect mostof the (cooperatives in the state) -- will again require thesame documentation as a year ago if you're delivering rice toone of our facilities."
e-mail: [email protected]Delta Farm Press Online Exclusive
