The global economic, climatic and supply and demand settings make a discussion on the outlook for rice especially complex.
As the countries of the world are supposedly embracing increasingly open markets and free trade, global rice trade at 25 million metric tons is only a fraction above last year's 24.9 million metric tons and well below 2002's 27.5 million and 2001's 27.8 million metric tons.
Will the revitalized global recovery that was producing strong economic activity and demand for commodities coming into 2004 be able to achieve a strong self-sustaining expansion?
If we assume the answer to be yes, the question becomes, “Will this expansion generate a demand for rice similar to the last period of robust global economic activity from mid-1994 to mid 1998, or will today's global rice competition and food security conscious countries limit rice pricing opportunities in the immediate future?”
Global economic activity is at a critical stage in its two and a half year recovery from a nasty recession to strong or robust economic activity. During part of 2003 and early 2004, commodity prices as a group soared due to expanding demand from a recovering global economy that reached a strong level of economic activity coupled with minor global weather disturbances.
Then what has happened to prices?
We are experiencing a correction in many commodity prices as the global economy weans itself from injected financial stimulus and transitions to self-sustaining economic expansion.
On the climatic situation, there is no major weather event on the horizon that could significantly disrupt global supply; that doesn't mean there won't be, it's just not obvious.
On the supply side, global rice stocks are projected to be at lows not experienced since the early 1980s — at 69 million metric tons, down from the 2000-01 record high of 150 million metric tons.
That said, improving global economic activity, governmental intervention by many countries and strengthening global prices are encouraging global rice production. Global 2004-05 milled production is estimated at 397.8 million metric tons compared to 387 million metric tons in 2003-04 and the record production set in 1999-2000 of 408.7 million tons.
USDA forecast U.S. rice production in 2004-05 at a record 222 million hundredweight. Harvested area is estimated at 3.33 million acres. Average yield is estimated at a record 6,651 pounds per acre. Long-grain production is estimated at 163 million hundredweight and combined medium- and short-grain production is estimated at 59 million hundredweight.
Ending stocks of all rice are projected at 33 million hundredweight 39 percent above 2003-04. Additionally, USDA is estimating the season-average farm price for 2004-05 at $7 to $7.50 per hundredweight, which compares to the 2003-04 price of $7.49 per hundredweight and the 2002-03 price of $4.49 per hundredweight.
On the demand side, rice trade in the Western Hemisphere has returned to more normal levels as South America rice production has responded to the early 2003 shortfall. More specifically, Brazil's import needs are estimated in 2005 at 500,000 metric tons — the same as 2004 but considerably below the large demand of 1,200,000 metric tons in 2003.
I still fully expect the global economy to achieve a healthy level of sustained expansion, which implies improving demand for rice globally. The speed of the expansion may be slower than originally expected. I expect the global expansion coupled with dangerously low global rice stocks to continue strengthening world rice prices.
Domestically, with U.S. 2004-05 all rough rice exports projected by USDA at 35 million hundredweight, 7.8 million hundredweight below 2002-03, with U.S. all rice production at a projected record and long-grain rice approaching record production levels, weakness in U.S. long-grain export prices is expected.
For the marketing period 2003-04 which began Aug. 1, 2003, and ended July 31, 2004, U.S. all rice prices ranged from $5.47 per hundredweight to $8.79 per hundredweight, an average for the 2003-04 market period of $7.49 per hundredweight.
Now consider pricing activity in the first month of the U.S. 2004-05 marketing period, which began Aug. 1, with an initial estimated U.S. all rice price of $8.49 per hundredweight. Then consider USDA's current 2004-05 U.S. all rice estimate is a price range of $7 per hundredweight to $7.50 per hundredweight.
A slide show that accompanies this article is available on the Internet at http://www.aragriculture.org/agfoodpolicy/ricesitol/slides/Delta_Farm_Press.pdf.
Bobby Coats is an agricultural policy analyst with the University of Arkansas.