Although the U.S. accounts for less than 2 percent of world rice production, it has ranked as the third or fourth largest exporter since 1995 and accounted for more than 10 percent of global trade in 2009. The U.S. is a consistent supplier of high-quality rice, shipping long-, medium-, and short-grain rice to more than 100 countries. The U.S. is the only major exporter that ships rough rice (unmilled), as the Asian exporters prefer to capture the value added from fully milling the rice.

In most years, growth in U.S. shipments to developing countries is limited (particularly for long-grain milled rice), since U.S. rice is higher quality and typically priced well above similar grades of Asian rice. However, in years of tight world supplies, U.S. shipments of rice to developing countries have soared. In 2007-08, U.S. exports jumped almost 16 percent from the previous year, and again in 2009-10. In both years, the U.S. price difference over Asian competitors declined.

Several factors have enabled the U.S. to become a reliable supplier to world rice markets. The entire U.S. crop is irrigated, and growers plant only high-quality seeds. As a result, annual yield variations are typically less than in Asia, making severe crop shortfalls rare in the U.S. In 1988, for example, a year of severe drought, U.S. yields dropped less than 1 percent.

There also is some acreage—mostly in the Mississippi Delta—that can be shifted to rice production if global demand increases sufficiently. Uruguay and Argentina also export the bulk of their crops but could not significantly expand production or trade without major infrastructure investments in rice marketing.

The U.S. consumes only about half its rice production, leaving large amounts for export. U.S. per capita use of rice is about 26 pounds per year—less than one-eighth the average in Asia where it is a food staple—and is barely increasing.

In addition, the U.S. rice industry maintains private stocks that could be quickly moved into the global market when it is profitable. In contrast, much of Asia’s stocks are in government-held food reserves that are used only for domestic needs. Few exporters except those in Asia and the U.S. keep significant rice stocks, largely due to limited storage capacity.

Global price and demand surges affect U.S. growers

In the long run, self-sufficiency programs reduce trade, lower global trading prices and—because of lower prices—make U.S. rice less competitive in most markets. In the absence of protectionist policies, higher global trading prices would signal growers in the U.S. and other rice-exporting countries to grow more rice, leading to increased U.S. exports and world trade.

In contrast, global price and trade instability may periodically benefit U.S. growers in the short run. If rice supplies become tight in Asia, causing regional exporters to halt sales and motivating importers to ratchet up purchases, the U.S. can move more rice quickly into the global market due to its modern and large-scale marketing and transportation system.

In 2007/08, global rice prices rose to record levels, nearly tripling from August 2007 to April 2008 (see “What’s Behind the Surge in Global Rice Prices?” in the September 2008 issue of Amber Waves). World rice prices began to climb in late summer of 2007 as oil prices soared, the value of the dollar declined, and prices spiked for most traded commodities. At the same time, strong income growth in Asia contributed to rapidly rising domestic food prices. Largely in response to the rising food prices, several Asian exporters began to restrict or ban rice sales in early fall of 2007. By April 2008, when global rice prices peaked, India, Vietnam, Egypt, China, and Cambodia had enacted export bans or restrictions, keeping about 40 percent of available global export supplies off the market. Pakistan established a minimum export price, but it was well below global trading levels and had no market impact. Among the major exporters, only Thailand and the U.S. were not restricting trade. However, the Government of Thailand still kept more than 4 million tons of unmilled rice off the market and even talked of creating a regional rice cartel to control trade. Both factors supported high prices.

These export bans and restrictions were the major reason for the record global rice prices in 2007/08. High oil prices, a weak dollar, and a general rise in commodity prices were less important factors. The global supply and use situation for rice did not support prices at reported levels. In fact, global rice production was the highest on record in 2007/08, and only one exporter—Australia—experienced a crop shortfall.

Rapid, large-scale buying in 2008 by several major importers, a response to concerns over food security and the possibility of even higher trading prices in the future, exacerbated the price situation. In the spring of 2008, the Philippines, the world’s largest rice-importing country, announced several massive offers (tenders) to purchase rice but was unable to fulfill them. The Philippines is far more dependent on imports than most Asian countries, importing more than 15 percent of annual consumption. Malaysia and several West African countries also attempted to secure large amounts of rice for immediate delivery to boost stocks, magnifying the already rapid rise in global prices.

U.S. picked Up sales in 2007/08 in Sub-Saharan Africa, Middle East…

The combination of export embargoes, a thin market, and large-scale buying by several major importers allowed the U.S. to expand sales in many traditional and nontraditional markets in 2007/08. The quantity of U.S. rice exported in 2007/08 increased almost 16 percent from a year earlier. A major destination for increased U.S. shipments was the eastern Mediterranean, which had largely been supplied by Egypt until it restricted sales. U.S. sales to Turkey and Jordan—the largest markets in the region—rose rapidly. U.S. rice sales to nontraditional buyers such as Israel, Syria, and Lebanon expanded sharply in 2007/08. U.S. sales also increased to Oceania, a market previously supplied by Australia until drought drastically reduced that country’s rice production. U.S. sales to Sub-Saharan Africa rose sharply in 2007/08 as well. Traditional suppliers to the region banned sales, and local governments, concerned over food security, sharply increased purchases.

In the Western Hemisphere, the U.S. found a significant market in Venezuela—not a typical buyer of U.S. rice—in early 2008, a result of tight supplies in South America and concerns over finding a supplier in the region. Venezuela previously purchased most rice from regional sellers. The country remains a top market for U.S. rice. U.S. shipments to Mexico, the largest export market for U.S. rice shipments, soared 12 percent to a record high in 2007/08, as Mexican buyers quickly purchased large quantities of U.S. rice due to concerns over availability and the possibility of even higher prices in the future.