Rice Harvest
Overproduction of rice in 2018 could resut in sluggish to lower prices.

2018 overproduction potentially devastating to rice prices

Dramatic swings in Arkansas long grain rice acres have become the norm and this is anything but a good thing.

Market participants are hearing an array of 2018 rice acreage and production projections for Arkansas. All projections are pointing to higher acreage and production in 2018 over 2017:

  • Due in part concerns regarding weak soybean and corn 2018 pricing opportunities and over expectation possibilities regarding 2018 rice pricing opportunity.
  • Public and private varieties are coming on line and creating significant optimism about Arkansas productivity and quality improvements.     
  • This is important

If rice market participants believe, and this is especially true for 2018 Arkansas long grain rice acreage and production, that the state will overplant and overproduce in 2018 with no new demand source, the market could turn sluggish to weaker 2017/18 prices for the remainder of the marketing period; depending on 2018 planted long grain rice acreage, potentially chronic low prices could result for the 2018/19 marketing period. 
2017 Arkansas Total Rice

Harvested Acres: Arkansas’ total rice harvested acres in 2017 is estimated by USDA at 1,093,000 acres, 28 percent below 2016. FSA preliminary failed total rice estimate is 51,179 acres and prevented planted 218,791 acres. Without weather and global economic issues potential total Arkansas rice acreage including failed and prevented is 1,362,970 acres.

Yield per Acre: Arkansas total rice yield per acre in 2017 is estimated at 7,400 pounds or 164 bushels per acre, the 4th highest on record.

Production: Arkansas total rice production in 2017 is estimated at 81 million cwt., 17 million cwt. below a 5-, 10-, and 15-year average of around 98 million cwt.

2017 Arkansas Long Grain Rice:

Harvested Acres: Arkansas long grain rice harvested acres in 2017 is estimated 945,000 acres, 445,000 acres or 32 percent below 2016’s 1,390,000 acres. The previous six year average is 1,123,000 acres.

Production: Arkansas long grain rice production in 2017 is estimated at 70 million cwt., the 2nd lowest in the current 7 production periods.

Top 4 Counties: The top 4 AR long grain rice counties by harvested acreage are Lonoke, 77,342 acres; Lawrence, 74,529 acres; Greene, 64,904 acres; and Poinsett, 62,922 acres.

2017 Arkansas Medium Grain Rice:

Harvested Acres: Arkansas medium grain rice harvested acres in 2017 is estimated at 147,000 acres. The previous 16 year average is 159,625 acres.

Production: Arkansas medium grain rice production in 2017 is estimated at 11 million cwt., or 24 percent greater than 2016.

Top 4 Counties: The top 4 AR medium grain rice counties by harvested acreage are Poinsett, 28,819 acres; Jackson, 19,078 acres; and Lawrence 13,791 acres.

World Rice Fundamentals

If one takes USDA’s balance sheet at its face value, 2017/18 world rice milled production is 481 million metric tons, the 2nd highest on record, and world rice milled consumption at 480 million metric tons is also the 2nd highest on record. World rice production has exceeded consumption in the current 11 marketing periods.

World trade at 45.1 million metric tons, 2nd highest on record, and consideration could be given to global reflation providing a more bullish trade bias for 2018.

That said, world rice ending stocks at 138.9 million metric tons is the highest since 2001/02. Collectively, from a global perspective, we may not need to be conservative in our Arkansas acreage expansion plans without an additional known demand source.  

U.S. Rice Fundamentals

 The 2017/18 long grain rice total supply is estimated at 178.5 million cwt, which is 15 percent below 2016/17. The 5 year average is a 190 million cwt., and the 10 year average 191 million cwt.

The 2017/18 long grain rice total export is estimated at 74 million cwt., 4.7 million cwt below last year. The 5 year average is 72 million cwt, and the 10 year average 73 million cwt.

The 2017/18 long grain rice ending stocks are estimated at 16.5 million cwt, 47-percent below 2016/17 and the 2nd lowest in the previous 13 marketing periods. The 5 year average 23.7 million cwt and the 10 year average is 24 million cwt, potentially favorable for 2018 prices unless U.S. overproduction occurs and world production is average or above.

2018 Global Macro Forces Positive

Present domestic and global fiscal, monetary, trade and regulatory policies are

adequate to overcome:

  •  Chronic global slow growth
  •  Low to negative interest rates

This assumes social, political, trade and military stability. 

My expectation is that policy intervention will significantly enhance 2018 Global Inflationary Forces and provide continued support for rice and grain prices.

 For rice, this assumes no major over-production. Over-production would be bearish pushing prices back toward 2016/17 season’s lows.

Concluding Thoughts

Dramatic swings in Arkansas long grain rice acres have become the norm and this is anything but a good thing:

  •  From 2011 to 2012 the harvested acreage shifted from 910,000 acres to 1,170,000, a 29 percent increase.
  • From 2013 to 2014 the harvested acreage shifted from 950,000 acres to 1,265,000 a 33 percent increase.
  •  From 2015 to 2016 the harvested acreage shifted from 1,045,000 acres to 1,390,000 a 33 percent increase.

 

2018 Arkansas Long Grain Rice: 2018 Arkansas long grain rice harvested acreage likely needs to stay in an acreage range of 1,086,750 to 1,173,000 acres (2017 = 945,000) or 15 percent to 24.1 percent increase. Why? Reality is with no new demand [and if LG rice harvested acreage exceeds a 15 [erect increase over 2017 acreage or 1,086,750 acres] one should likely expect increasingly downward pressure on long grain rice prices, so plan accordingly.2018 Arkansas Medium Grain Rice: Given the potential of new public and private varieties 2018 Arkansas medium grain rice harvested acreage could increase to 169,000 acres 15 percent increase over 2017. Here again overproduction could be problematic, so producers should study demand for medium grain before planting.

 

 

Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: [email protected]

 

Download Slide Show for charts and expanded details, Click Download Link

 

 

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