The economic health of the Arkansas rice crop -- both immediate and long-term -- was recently addressed by Eric Wailes. Following abundant August rains that led to floods and subsequent crop quality issues, the University of Arkansas economist and colleagues say the state faces damages to all agriculture of $40 million to $50 million.
On rice specifically, the report says “By the time the rain hit, harvest in the state’s 1.58 million rice acres had only reached 2 percent. Northeastern Arkansas saw the heaviest rain, with totals up to 12 inches. (Arkansas Extension rice specialist Jarrod) Hardke estimated 40,000 rice acres were hard-hit, with the largest amounts in Randolph 15,000 acres; and Craighead counties at 10,000 acres. Total losses for rice were estimated at up to $18.6 million.”
Prior to the rains, the distinguished professor and L.C. Carter chair in the agricultural economics and agribusiness, spoke at the Arkansas Rice Expo about what the rice industry could look like in 10 years.
In early September, Wailes spoke to Delta Farm Press. Among his comments:
On the $50 million damage estimate for Arkansas agriculture…
“The estimate may be a bit conservative. We may be a bit high on some commodities and low on others. There remains a lot of the harvest to go. The rains were an unusual event and hit as many crops were just this side of harvest.”
Northeast Arkansas flooding in during both planting and harvest seasons “is rare. We’ve had huge rains during the planting season and huge rains during the harvest season. But it’s awful (for a second floods) to happen pre-harvest just when much of the crop has been made.
“Some serious decisions will have to be made in the coming days by producers, crop insurance adjusters and agents. They’ll have to come up with reasonable approaches to harvest.”
On ‘hidden’ damages and a trickle-down…
“We also have to keep an eye on hidden damages. We won’t know about the true costs of deteriorated quality for some fields until the crop reaches the elevators or mills. There’s more uncertainty in trying to nail down the damages for this event than in previous events where there was more precise data or numbers in terms of acres lost, harvest lost.
“It’s already a bad year for equipment dealers because of low crop prices. Going into this season we had projections of a near-record rice harvest and rice prices were down. Corn prices, bean prices, wheat prices have all been down.
“The more important story is the whole commodity price complex is relatively depressed. That’s led to the whole crop/farm economy losing strength and has implications for input dealers, farm credit, all of the components that make the farm economy work.”
On what rice producers can expect in 2025…
“It’s a big enough challenge figuring out what would happen going into this harvest. Again, we were expecting a huge rice crop. I know millers and the rice industry in general about finding a market. Now, with the latest crop condition report, upwards of 25 percent of the Arkansas rice crop is rated as ‘poor’ or ‘very poor.’
“I don’t want to say that’ll help with the situation. It’s terrible for those farmers who’ve suffered various problems with the flooding. On the other hand, it does ease a bit pf the pressure on having to locate the markets.
“Longer term, we need to look at the main drivers of rice in general. Rice is one of the more policy-distorted crops traded in world markets. We face large amounts of protectionism. That was made clear in last year’s U.S. International Trade Commission report on the prospects of U.S. rice exports. They noted a number of countries that have significant import barriers that affect the opportunities for Arkansas and U.S. exporters.
“Another driver is economic growth in developing countries. If you look at that long-term projections – and I’m primarily talking about Latin America and sub-Saharan Africa – we’re talking about 4 to 6 percent annual GDP growth. That’s a very positive thing.
"Looking at the African markets, you have high population growth, high income growth and rice is an ascendant food in many countries. It’s a new, novel food that was once thought of as a luxury good. But now it’s becoming affordable, certainly at the prices we’re currently facing.”
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More on global trade, and trade pacts, in the future…
“I think the total global trade market will increase by another 25 percent over the next 10 years. What role the United States can play in that will be a function of how competitive we can be with a number of countries and what happens in regard to trade policies.
“There have been a lot of discussions about the TPP and whether it’s in the interest of the U.S. rice industry. I believe the USDA and USTR have made fairly strong arguments for the TPP looking at agriculture as a whole.
“For U.S. rice, though, there is concern it would open up direct competition with Vietnam for the Mexican market. That presents a challenge. Frankly, we should be able to maintain the Mexican market against the Vietnamese, who have a clear disadvantage logistically in getting rice there. That’s a paddy market and Vietnam typically doesn’t export paddy and the United States does. So, I don’t know how strong a challenge that really is, although it certainly is there. If we maintain the Mexican market, in 10 years it may be a 900,000 ton metric ton market.
“Latin America may be another 900,000 ton metric market. We have a trade agreement with Peru – we’ve had a TRQ with them. We’ve been successful meeting the TRQ, even going above it last year, with Colombia.
“Of course, we’re facing some direct competition out of Uruguay, Argentina and Brazil. The United States will have to focus on developing and producing a competitive, high-quality rice crop.”
On exports to Cuba and China…
“If the Cuban market opens up it could be a 300,000 to 500,000 metric ton market. That’s a huge opportunity. I’d like to think in 10 years we’d at least provide 300,000 metric tons to the Cuban market. It’s a country that will be looking for high-quality rice to feed the locals and the tourist industry that’s sure to thrive. Prospects are good but we need Congress to move on ending the embargo and figuring out the financing of U.S. ag exports in Cuba.
“Another market that will require strong, competitive pricing is China. There are some upscale aspects -- we could provide rice for the middle- and upper-class grocery stores. That could be 200,000 metric tons.
“The China market (wants) half medium-grain, half long-grain. We need to get a piece of that action. The stumbling block is getting a phytosanitary agreement in place.”
On rice and climate change…
“There are number of major importing countries – Bangladesh among them – that are vulnerable in terms of their rice production, which is in lowland areas, coastal areas. The impact of climate change that I see is it may expand imports into those countries and take some of the exportable surplus from some of the traditional southeast Asian exporters like Vietnam, Thailand, Myanmar, Cambodia, even India and Pakistan.
“That would mean a potential vacuum, a potential opportunity, in the Middle East and sub-Saharan Africa.
“Climate change will affect rice production in a number of countries. To the extent it doesn’t have a negative effect here in the United States we should be able to capitalize.
“The Arkansas congressional delegation is doing its best to open the Cuban market. Rep. (Rick) Crawford is leading that charge and I believe that’s where Arkansas is aiming to really do business.
“To ensure we can do that, we must continue to invest in research and Extension activities. That will really help make the Arkansas rice farmer productive and efficient and can making a living through both the domestic and export markets.”