U.S. long grain rice prices have pulled back, but until the planting uncertainty is resolved, I expect the larger trend in rice prices to continue upward. Uncertainty about U.S. long grain rice planting is driven by production cost increases from energy inputs, lingering drought impacts, and price uncertainty.
Since cash-flowing good rice operations in this economic setting can be difficult, cash-flowing other operations will require the market to provide a price that reflects producers' costs of production. Otherwise, planted rice acreage is sure to suffer, which may significantly strengthen new crop rice prices.
Problematic for old crop U.S. long grain rice prices is that supplies are at record levels and ending stocks are projected to be the third largest since 1986.
USDA estimates 2005-06 supplies at 211.5 million hundredweight, up 11 percent from 2004-05's 191.3 million hundredweight. Total 2005-06 long grain use is projected at a record 189.1 million hundredweight, 12 percent above 2004-05's 168.6 million hundredweight.
USDA reduced 2005-06 long grain exports from its February 2006 estimate by 2 million hundredweight — from 97 million hundredweight to 95 million hundredweight. Ending stocks are now estimated at slightly below 2004-05's 22.7 million hundredweight at 22.4 million hundredweight.
That said, for the fourth consecutive marketing period world rice use exceeds world rice production. For the 2005-06 marketing period, world rice use of 417.8 million metric tons exceeds world rice production of 409.7 million tons. Even though world rice production has increased for the third consecutive marketing period, world rice consumption still exceeds production by 8.1 million metric tons.
For perspective, U.S. rice producers produce 7.1 million metric tons and export 3.7 million tons.
For the third consecutive month, global rice trade projections for calendar year 2006 have improved from 25.4 million tons in December 2005 to 26.8 million tons in March 2006. Global rice trade in calendar year 2005 was a record 28.4 million tons. This year's trade projections will be the sixth largest on record.
USDA's data shows U.S. long grain rice prices #2/4 currently quoted at $368 per ton, FOB; Thai prices currently at $309 per ton, FOB on an announcement of the dry season intervention scheme at the current price level and currency fluctuations; and Vietnam prices are down $14 from February to $248 per ton, FOB, due to normal seasonal harvest pressure of the Winter-Spring crop. Thai, Vietnam and other export competitor's price advantages simply are limiting our ability to grow the U.S. rice export market.
Thai rice prices continue to improve. In milled metric tons, they are as follows:
|August 2005||$288||March 2006||$309|
Vietnam rice prices in milled metric tons are as follows:
|August 2005||$255||March 2006||$248|
Southern long grain rice prices in milled metric tons are as follows:
|August 2005||$293||March 2006||$368|
Yes, U.S. long grain rice prices have pulled back, but until the planting uncertainty is resolved, I expect the larger trend in rice prices to continue upward and for long grain rice producers to have additional pricing opportunities.
A slide show that accompanies this article is available on the Internet at http://www.aragriculture.org/agfoodpolicy/_DFP/2006/March172006.pdf.
Bobby Coats is an agricultural policy analyst with the University of Arkansas.