With the U.S. rice harvest mostly complete, NASS is forecasting a record U.S. all rice production of 228 million hundredweight, 28.4 million cwt over the 2003 production season and 34.3 million cwt over the average for the past 10 production seasons. To put 34.3 million hundredweight of rice into perspective, that is 32 percent of this year’s Arkansas production, or 68 percent of California production, 121 percent of Louisiana, 213 percent of Mississippi, 277 percent of Missouri, and 240 percent of Texas production.
Production was triggered by a huge run up in rice prices in the second half of 2003 and the first half of 2004. U.S. all rice prices marched from $5.27 per cwt ($2.37 per bushel) in August 2003 to $8.79 per cwt ($3.96 per bushel) in July 2004. These strong rice prices were a function of a rapidly expanding global economy’s appetite for commodities including rice and the weather induced demand for rough rice in Latin America.
What’s the immediate foreign demand for U.S. rice?
U.S. all rice exports in 2004/05 are projected by USDA to be the second largest on record at 105 million cwt, 1.3 million cwt above the previous marketing period, but 19.6 million cwt below the 2002 marketing period record of 124.6 million cwt. Foreign demand for U.S. rice remains relatively strong when compare to historical standards. For perspective the previous ten year marketing period averaged 93 million cwt of U.S. exports and the last period of strong robust global economic activity (mid-97 to mid-98) which should have similar relationships to the current period averaged only 87 million cwt.
Rough rice exports are projected at 32 million cwt, the fourth largest on record, down from the 2001 marketing period of 32.2 million cwt, 2002’s 42.8 million cwt and 2003’s 34.4 million cwt. The previous 10 year average was 25.1 million cwt.
Long grain exports are projected at 80 million cwt, fourth largest on record and this compares with the previous 10 year average of 73.4 million cwt.
So why have rice prices shown such price weakness since July?
Producers planted assuming Latin American and foreign demand as a whole would be greater than is currently expected. Total U.S. rice supply is estimated by USDA for the current marketing period (August 2004 to July 2005) at a record 265.8 million cwt. The previous 10 year average was 232 million cwt. USDA is projecting U.S. all rice ending stocks of 41.8 million cwt, the largest since 1986, long grain ending stocks of 23.4 million cwt which compare to the previous 10 year average of 14.7 million cwt and medium and short grain ending stocks of 17.4 million cwt which compares to the previous 10 year average of 12 million cwt.
What’s the price outlook?
Globally, the following trend will continue until some type of trauma event occurs with the best and mostly likely event being weather related. Expect slow but continued improvement in Asian rice prices. Currently, USDA reports Thai 100B quoted at $257 per ton, FOB, $14 above October 2004. U.S. #2/4 long grain milled rice is currently quoted at $335 per ton, FOB, down $5 from October 2004. The spread between U.S. and Thai prices has shrunk to $78 per ton. Viet 5% prices have also gained $13, with quotes currently at $231 per ton, FOB. Meanwhile, Indian 5% is up $5 to $247 per ton, FOB.
During the 2003/04 marketing period U.S. all rice prices trended up from a August 2003 low of $5.27 per cwt ($2.37 per bushel) to a July 2004 high of $8.79 per cwt ($3.96 per bushel). The U.S. all rice price for the first three months of the 2004/05 marketing period have developed a negative trend line. USDA has projected a 2004/05 season-average farm price in the range of $7.00 to $7.50 per cwt or $3.15 to $3.38 per bushel and I find myself hoping rice prices meet their expectations.
The slide show that accompanies this article is available on the internet at http://www.aragriculture.org/agfoodpolicy/News_Articles/DFP/2004/graphics/November182004.pdf
Dr. Bobby Coats is a farm policy specialist and agricultural economist with the Arkansas Cooperative Extension Service.