‘Best way to get a free Cuba is to trade with them’

The 11 million inhabitants of the island of Cuba offer a huge potential market for U.S. rice and other commodities. The proximity of Cuba to the U.S. rice-producing area and Cubans’ fondness for rice make it a natural fit.

But, until a majority of members of the U.S. Congress decide to let bygones be bygones and lift the remainder of the restrictions on rice exports to Cuba, the latter will be one more market that the U.S. is seemingly locked out of.

“In order to get a real free flow of rice back into Cuba, we’re going to have to see this embargo taken away,” says Dennis DeLaughter, a market analyst with Vantage RM LLC in Austin, Texas. “That’s going to be a real issue in Congress because there are still a lot of people up there who believe that this 50-year policy that has been a complete and total failure will at some time work

DeLaughter, a speaker at the National Conservation Systems Cotton and Rice Conference in Baton Rouge, La., said the continued support for the 50-year embargo is baffling. “We know that by definition stupidity is doing the same thing over and over again, expecting a different result.”

At some point Cuba will become a big market for U.S. rice, he said. “We just need someone to finally wake up and say the best way to get a free Cuba is to trade with them>

For now, U.S. rice producers face a tough slog over the next couple of years because the world has more rice that it can consume given the current stocks outlook and the continuing economic problems in the world’s poorer nations.

“We’re seeing a supply-driven bear market, which is the worst market you can have,” said DeLaughter. “And we would expect the market to stay at low levels and down below cost-of-production levels for the next year to possibly two years.”

Much depends on rice-producing countries in south Asia. “We know Thailand is trying to become the No. 1 exporter in the world again. So they’re lowering prices, and they’re really competing against India for that. India’s supply has dropped dramatically. They’re gone from about 25 million metric tons down to about 16 million metric tons.”

Thailand is expected to finish the year with around 11 million metric tons of ending stocks. Dropping those to a more “normal” level of about 6 million metric tons would be a positive for the world’s rice markets.

“We could begin to see a bit of the pressure come off of prices that’s there because of the world supply,” says DeLaughter. “The U.S. is doing allright on the export side, but there’s not going to be a whole lot of additional exports that we’re going to be able to get.”

Iraq continues to be an issue because its grain buying agency has been mostly purchasing from Vietnam when it tenders for rice. “We’re hoping to get more help from the Iraq market to help reduce the supply,” says DeLaughter. “But right now our supply is way too big, and demand is just not there to cover it.”

Lower energy costs will help farmers both from the standpoint of production costs and transportation costs for moving and storing rice. “We will see some production costs benefits, which we certainly need when we have this kind of supply,” he noted.

When will rice prices go up? “We think in a couple of years when we see Thailand and India improve their particular situations, the U.S. will be competitive and able to increase our world footprint as it were,” DeLaughter says.

“We’re optimistic on a longer term basis. We think China will become a factor in the world market in many areas, including rice. We’re not saying the United States will export a whole lot of rice in there, but remember that Thailand is pretty close. So as they start to benefit from additional income and their gross domestic product growers, there will be some big moves into China, which will affect prices in corn, in rice three to five years down the road.”

For more on the U.S. and world rice outlooks, visit http://www.ers.usda.gov/topics/crops/rice.aspx.

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