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Strong rice prices are likely for 2008-2009

Jan 8, 2008 10:19 AM, By Elton Robinson
Farm Press Editorial Staff

Nathan Childs, an economist with USDA’s Economic Research Service, can’t recall a rosier price projection for rice since he began presenting outlooks at the USA Rice Outlook Conference 12 years ago.

In fact, U.S. rice prices are higher than they’ve been since 1981 for rough rice, and since 1994 for milled rice, thanks to higher prices in other commodities including wheat, soybeans and feedgrains, rising global prices for rice, tight supplies in other exporting countries, the expectation of the smallest carryout in 26 years, and export bans by India and Vietnam that will likely be lifted in early 2008.

The export bans essentially “put the No. 1 and No. 2 shippers out of business,” Childs said to the gathering in Orlando. “Drought in Australia has cut supplies for medium and short-grain rice. It’s a small market, only about 12 percent of the global trade, but the United States would like to gain marketshare.”

Childs noted that as of this month, “outstanding rice sales are double that of a year ago, with total commitments up about 40 percent, so the year has started off very strong.”

It adds up to U.S. exports projected 17 percent higher than a year ago. “Both long and medium-grain exports are expected higher in 2007-2008. Milled and rough rice exports are up from a year ago, with rough up about 6 percent and milled rice up a projected 23 percent than a year ago.

“Rough rice exports are higher due to greater sales in Mexico and Central America where sales this year are about double from a year earlier. But they’re probably buying early in expectation of higher prices later. I would not factor the kind of sales that have existed so far for the rest of the marketing year.”

The export outlook includes a recovery in the EU-27 and strong shipments to the Middle East where the United States competes with Asian exporters.

The U.S. average farm price (rough basis) is projected at the highest level since 1981 at around $11 per hundredweight, noted Childs. “Even during our El Nino years, we only were barely around $10 per hundredweight.

“Milled rice prices have also risen sharply this fall. Almost every week, a new report shows slightly higher prices in Europe. California prices are high despite the big carry-in and a large crop.”

Childs noted that U.S. prices for both long and medium-grain milled rice are the highest since early 1994, when Japan began purchasing its 2.2 million tons of emergency purchases. Thailand’s prices are the highest since the spring of 1997.

A couple of wet blankets are the highest fuel and fertilizer costs Childs has ever seen. It’s only barely comforting that the rest of the world’s rice producers are suffering too. Another downer is that U.S. rice imports are projected at record levels for 2007-2008. This is due to a long-term increase of Thai Jasmine and basmati from India and Pakistan. China and India continue to ship rice to the Puerto Rican market. In addition, Thailand ships about 60,000 to 70,000 tons of rice to the United States each year classified as medium, short-grain.

In the United States, USDA has projected average rice yield for 2007 at a record 7,247 pounds, up about 6 percent from last year. “We had generally favorable weather in almost every growing area. There were record yields in all southern states except Texas. California had a very big yield boost, but it wasn’t quite a record.”

Despite good yields and a slightly larger crop, U.S. ending stocks for rice are expected to plunge by 31 percent in 2007-2008, according to Childs. “There really isn’t on average an excess supply of U.S. rice. However, by class, long-grain stocks have dropped 56 percent. Medium-short stocks are expected to go up about a third.”

For 2008-2009, “There will be a little bit of an increase in U.S. rice acres, because we need more rice,” Childs said. “We’ll see higher input costs and a return to a trend yield, a much smaller carry-in, another year of record imports, a slightly larger crop, smaller supplies, larger domestic use and a bigger market.”

Exports will likely decline, not due to price competitiveness or lack of demand, rather, there just won’t be enough rice to ship. Childs also projects a smaller carryout, higher global prices.

“We don’t have a price projection for 2008-2009, but everything is bullish. I’d be hard pressed to come up with a factor that would likely reduce the U.S. price going into 2008-2009. Bullish factors include higher world prices, tighter U.S. supplies, stagnant local area and no growth in global rice yields in several years.”

email: erobinson@farmpress.com

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