What is in this article?:
- US rice reputation takes hit after heat-damaged crop
- California steady
- A poor rice crop in 2010, weather, and falling export demand continue to challenge U.S. rice producers.
- U.S. rice producers paid the price around the world for the 2010 heat-damaged U.S. crop.
- California a benefactor from opening of Japan's market.
Rice production has rebounded in several countries, creating more export competition, Brothers noted. “Brazil, Argentina and Uruguay also had excellent rice crops in 2011-12. We saw them (exporting) where we’ve never seen them show up before. Normally Brazil is a net importer. South America has also moved into the rough rice market in Central and South America.
“Australia had four or five years of serious drought, but had a good crop last spring, and expects to have a good crop this spring. Egypt has had water problems, and producers ignored the government’s caution about planting a lot of rice, and they are a factor in the medium-grain market. The Chinese have pulled back and we’re not seeing competition there.”
Brothers noted that Brazil’s emergence in the export market has hurt U.S. long-grain milled rice exports to Haiti. But there is a catch to Brazil’s success. “We found out that Brazil is moving rice from the interior of Brazil into more populated areas and subsidizing it to the tune of about $60 a ton. But that subsidy is also being used to export rice. And that’s how Brazil was taking so much business.
“We are working with Washington to stop that from happening in the coming year. But the Brazilians have had some weather issues, and the crop is not as large as it was a year ago.”
While rice prices are generally set in Asia, U.S. prices can “de-couple” from those prices “if we have another small crop. We may see that happen in the coming year,” Brothers said.
U.S. rice acres were down significantly in 2011, for reasons including flooding and disenchantment with rice prices in comparison with other commodities, including soybeans and corn, Brothers noted.
California acres, however, have remained relatively steady. “California was a real benefactor of the opening of the Japan market. That’s a minimum access of 400,000 tons. We have a verbal agreement that we would supply 50 percent of that market, which is mostly a medium-grain market. That’s not in writing, but they have honored that commitment.”
High prices incentivized Southern rice producers to plant more medium-grain rice last year, noted Brothers. “Farmers didn’t realize that most of the business in the South ended up on contracts. There wasn’t a lot of excess business for additional medium-grain, and we’re struggling moving this big crop of medium-grain.
“California raises a quality, medium-grain rice that is much more attractive than what we produce in the South. They don’t have the disease or insect pressure.”
Brothers also touched on the lack of convergence between rice futures and the cash markets. “The Commodity Futures Trading Commission wants something done. But we have been cautioning them. The rice contract is young and is a very thinly-traded contract. Riceland is probably self pricing for 50 percent of what we do. We have to have a tool to lay our risk off. We can’t take those risks without a mechanism to hedge it. So what we do in Chicago is very important. I’m uncomfortable with some of the changes they’re talking about.”
When asked about concern over the quality of hybrid rice, Brothers said, “We’re not saying they’re perfect, but neither is conventional rice. We seem to be up against the wall with our conventional varieties. We don’t know quite where to go to get greater yields. We think the hybrids are the best way to bring new varieties to the marketplace.”