Late Mid-South rice plantings and resulting management problems have many farmers hoping for good, not great, yields. With input costs soaring, the rice market — and anything that might shift it — is all-important.
That may be the reason for the grower consternation that greeted the mid-July release of the USDA’s World Agricultural Supply and Demand Estimate (WASDE). Thomas Wynn, U.S. Rice Producers Association director of market development, says the association has certainly heard plenty from members about the report.
Among the report’s numbers: 2.9 million rice acres planted in 2008-09 (versus 2.76 million acres in 2007-08) and a yield estimate of 7,121 pounds per acre.
“We feel fairly comfortable with the acreage report the USDA came out with. Folks on the ground — farmers, seed dealers and different parts of the industry — say that acreage number was acceptable.
“What really is a concern, though, is the USDA numbers that say there’s a lot more rice in the pipeline.”
Wynn says the WASDE report increase in beginning stocks for the year are especially questionable.
“Beginning stocks are like an accounting balance sheet — the same as ending stocks from the previous year. The USDA saw fit to increase the rice beginning carry-in by several million hundredweights.
“But we were out of rice at the end of last year. The rice trade ground to a halt in February and March. There hasn’t been any rice to be traded. So, we find it difficult to understand where these additional hundredweights came from on the carry-in side.”
Some growers have also complained about yield estimates in the WASDE report. That particular criticism is unfair.
“The NASS (National Agricultural Statistics Service) of the USDA is the agency that does all the statistical work in estimates for corn production, soybean production, rice production, and so on,” says Andy Aaronson, WASDE rice analyst. “Their first objective yield survey (of the season) comes out Aug. 12.”
The yield figures provided in the July 11 WASDE report weren’t based on any actual surveys, only trend yields.
“Let me read you the footnote (on page 14 in the WASDE): ‘For June and July, the projected yield is derived from the trend yields by rice for the period of 1990 to 2007.’
“So the yield we showed was based on trend, not a survey or us taking a yield number and adjusting for weather or insect damage. It’s based only on statistical trends and that’s clearly footnoted in the table.”
The WASDE report is “not allowed to be out in front of NASS, the agency responsible for basing yield estimates on a survey. And the first NASS survey isn’t until August. When we first came out with the 2008-09 estimates in May, June and July, they were all based on trends.”
Wynn accepts that explanation but “would expect to see a fairly significant reduction in yield estimates come August. That’s because so much of the U.S. rice crop is late this year. In Arkansas, there was severe flooding early that kept farmers out of fields. I spoke with a Louisiana producer a couple of weeks ago that was just planting his rice.”
In such conditions, “you can’t expect anything close to a bumper crop. And that’s what USDA is predicting so far. Their numbers show us having about 100 pounds less than last year’s excellent crop.”
Even trend estimates move the markets, says Wynn. “We’ve seen a lot of market reaction out of these numbers. The stocks report USDA came out with on June 30 was very illustrative of our points. Pull and scan it and you’ll see rice in all positions drastically decreased from March 1. It demonstrates the rice wasn’t there.”
When speaking with “major traders, guys at elevators, exporters — everyone is confused as to what is going on with the market. Everyone agrees the rice isn’t out there. If it were, we’d have been selling it for $1,000 per ton earlier this year. The market has gone down significantly. It was at $25 (per hundredweight) in April and now it’s around $17.20.”
Wynn says the current cost of production for rice in the South is “somewhere around $17.65. Our concern is more long-term. If our farmers don’t see the price response to the market they need, they won’t plant rice next year.”
All the news on reporting isn’t bad, though. For the first time, USDA issued a stocks report on June 30.
That report “was very revealing and positive for the market — we had a limit-up day as the positions became clear,” says Wynn. “We’ve also been pushing for a Sept. 1 stock reporting date in addition to the normal Aug. 1 report.”
The reason: a continuing northward migration of rice acreage. “As the critical mass of rice acreage moves into north Arkansas and Missouri, the harvest-time is postponed a bit more every year. So, the dates that were set forth in statute 15 or 20 years ago, no longer reflect the positions in the market at the time of harvest. And that’s what they were designed to do. A Sept. 1 report would provide a sort of baseline to figure out what kind of rice we have in all positions at the end of harvest.”
Regardless, timely and accurate reports are crucial — “to provide market transparency. With the current market volatility, the more transparency the better for everyone.
“If the market can’t be used, at least to some degree, as a hedging tool, then it takes opportunities out of producers’ hands. They won’t be able to offset risk. In this market environment, if they can’t offset or, at least, help manage that risk, they simply won’t plant rice.”
e-mail: [email protected]