U.S. rice, markets and regulations
Mar 25, 2008 10:11 AM,
By David Bennett
Farm Press Editorial Staff
Rice is in increasingly short supply and foreign governments are taking steps to ensure the diet staple remains available to their populations.
“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 and partnerships, Riceland Foods, Inc.
“The world rice supply/use has beginning stocks for 2007-08 at 75 million metric tons. Production is at 421 million metric tons and imports are at 28 million metric tons. That means a total supply of 524 million metric tons.”
Looking at use against supply, domestic use is at 423 million metric tons and exports at 29 million — over the past 27 years, trade has increased three-fold. Total use will be 452 million metric tons. That means ending stocks of 72 million metric tons.
“That ending stock number may not mean a lot to you,” said Brothers. “But notice 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-use ratio. We’re now down to 16 percent.”
There’s been a reaction to this situation — “a building perfect storm,” says Brothers. Vietnam banned exports last year and is just now beginning to quote and consider shipping again. India put in a minimum export price, which, in effect, banned exports. Egypt recently banned exports, as did Guyana. China has increased domestic support and has put on export duties. Previously, China had an export subsidy.
“All of this has us concerned over carryover stocks and what’s happening in world markets.”
The U.S. rice supply/demand numbers needs some explanation. In 2006-07, the carry-in came in at 95 million bushels. However, USDA had carried an estimate of 75 million bushels. That 20 million bushel swing “really upset the market price … it had an impact 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 million bushels. 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 new year, down 8 percent from the previous year. Production was up slightly at 440 million bushels (from 430 million). Imports grew from 46 million bushels to 48 million. Total supply is at 575 million 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 the action is. We really got out of the gate fast.”
The 2007-08 total rice use was up 8 percent, but the carryout was down 41 percent over the previous year. Also, the average farm price rose from $4.48 per bushel to USDA’s mid-range estimate of $5.15.
How do long-grain versus medium-grain numbers break down? “For 2007-08, carry-in for long-grain is down 14 percent from a year ago. Production is down from 325 million bushels to 316 million bushels. Imports are up from 31 million bushels to 34 million. That leaves a total supply down 4 percent at 413 million bushels.”
Looking at that supply against use, domestic use is down from 204 million bushels to 198 million. Exports are up 18 percent to 191 million bushels. Total use is up 6 percent to 389 million bushels. “All that pulls the carryout down 62 percent — from 63 million bushels to 24 million.”
As for medium-grain, there’s a different story. “In fact, looking at the picture, you might think it’s bearish compared to long-grain. But there are some good things happening.”
Medium-grain imports were unchanged at 14 million bushels. The 2007-08 total supply was up 13 percent at 159 million bushels. Domestic use was nearly unchanged. However, exports were up 31 percent (at 55 million bushels) and total use was up 13 percent (at 134 million bushels). Carryout was up 14 percent at 25 million bushels.
“I’d normally say these numbers are a bit concerning. But Australia has a drought and has had for seven years running. Australians have actually been in the United States trying to buy rice, not only to feed their own people but also to take care of the business they’ve built over the year. They hope one day to have rain and get back into rice production. Australia is a key competitor, particularly for California-grown medium-grain.
Egypt, which has an export ban, is another key medium-grain competitor.
“As for China, who knows what it will do? But it appears to me they’ll stay in a pullback mode. They’re taking action to ensure rice isn’t leaving the country until they feed their own people.”
Rice stock numbers came out on Jan. 11. Long-grain came in “as expected,” down about 5 percent (at 230 million bushels). However, going back to the 2005 number (277 million bushels), the latest number is down 47 million bushels from that high. Medium-grain stocks are up 16 percent (at 106 million bushels).
Every week any company exports rice from America it must report that to FAS. Those reports are compiled and published.
“Exports got out of the gate extremely fast early this year and they’ve stayed fast. Between milled and rough, long-grain export sales are up 24 percent. Medium-grain is up 22 percent. 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 is up 6 percent. Overall, shipments are up 12 percent.”
So, sales are up 23 percent while shipments are up only 12 percent. That gap leaves Brothers mulling several possibilities. One, much rice has been forward-priced. Two, there’s a lot of rice yet to be priced. Or, three, there’s a combination of the first two.
Key markets
Haiti is a very important market for the United States. Haitians consume a lot of rice and lately have been complaining about rising rice prices.
“The big concern among those we work with in Haiti is the government will … take actions that could be detrimental to the import of rice. We hope that isn’t true because, as you look around the world, the price of U.S. rice isn’t much different from anywhere else in the world.”
Meanwhile, Iraq hasn’t bought U.S. rice for several months. There was a tender in the last two weeks.
“I was told twice yesterday (Feb. 12), that Iraq wouldn’t buy U.S. rice at this time. One report was Iraqis had bought 50,000 tons of Thai rice and 50,000 tons of Vietnamese rice. That could be the first sign that prices are beginning to ration demand.”
The news is better from Saudi Arabia. “India produces ‘thermal’ rice — a low-quality parboil. With India pulling back, (the United States) is one of the few sources of parboil rice. Business with Saudi Arabia is up and I think we’ll end up with a gain on the year.”
The European Union will be harder to crack. “We’ve had a difficult time with the European market and the (aforementioned GM seed issue) that occurred. I was part of a group that went to the EU in December and met in Brussels to convince them of the effort and success we’d had (in removing the GM trait) and encourage them to lift the emergency measures they’d put in place.”
While Brothers and colleagues were returning home, the EU agreed to lift the emergency measures. That is supposed to go into effect in the next 30 days. But don’t get too excited, warned Brothers. “All we did was get the emergency measures lifted. That doesn’t mean the member states can’t continue to test and continue to give us problems.”
The other thing happening with the EU concerns the shipping service called LASH (Lighter Aboard Ship). The service involves small barges — about 385 tons. Those are loaded in the United States and remain intact to their destination. That allows rice to be 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 still have a lot of work to do with the EU and I believe current export levels will decline because of the loss of the LASH shipments.”
Cuba is “always of interest” to U.S. producers. It has bought no rice from the United States so far this year.
“I don’t see them importing U.S. rice unless there’s an interruption in the supply from Vietnam. They’re very close to Vietnam and the Vietnamese give them credit terms. The prices out of Vietnam have been considerably cheaper.”
June report
Riceland officials have been meeting regularly with the USDA’s National Agriculture Statistics Service. “We’ve been talking about what we can do to improve the reports and have convinced them of the need for a June 1 report.”
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 August 1. Our concern was a lot of rice on the farm was being missed. If true, at least by having the June 1 report, we’ll pick up that business quicker and not have a surprise on Aug. 1.”
There’s a lot of confusion about the stocks report, said Brothers. “When a farmer is called, he may have sold the rice in his bin, but he’s to report that rice as his stock. Ownership doesn’t matter — if it’s in your assets, you must report it. That’s true whether you’re a farmer, mill or warehouse.”
WTO
Shortly before the ASU conference, Brothers met with Susan Schwab, U.S. trade ambassador. “She said there’s still a tremendous amount of work to do. We don’t have it framed up the way it needs to be. And there’s maybe two months to get (the framework) done. If we don’t make serious progress by then, she doesn’t believe there will be an agreement.
“I’m not sure that’s bad news. My biggest concern is the (Bush) administration reaches some agreement that has no benefit for rice. We were left out of the Korean free trade agreement, if you’ll remember.”
Farm bill
Regarding the farm bill, Brothers said he knew “right out of the gate we’d be in trouble with the three-entity rule. Direct and counter-cyclical payments came out fairly well. The marketing loan benefits are unlimited but, for the most, that was true of the 2002 bill, as well.
“I thought (the House and Senate proposals) looked pretty good, that it could go to conference and if it came out close with all 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. was that (House Agriculture Committee Chairman) Peterson is talking to the (Bush) administration about a totally different package. I don’t think in my career at Riceland I’ve ever seen this happen. For that reason, I don’t know where we’re going and I don’t think anyone else does.”
email: dbennett@farmpress.com
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