U.S. prices for medium and long grain rice “have run up about as high as they're going to go for now,” according to Carl Brothers, senior vice president, Riceland Foods, Stuttgart, Ark.
Speaking at the Mid-South Farm and Gin Show in Memphis, Brothers said where prices go from here will depend on how much rice is planted in the United States in 2006.
Acreage estimates for 2006 are still sketchy, although Brothers agrees there will be less rice planted this year than last.
“I have 550,000 acres to 575,000 acres for California, and unless we see a tremendous rise in soybean prices, I see about a 5 percent to 10 reduction in Arkansas acreage in 2006. If we get more than a 10 percent reduction in Arkansas, we could de-couple from the world and see higher prices. If we're less than 10 percent, we have to stay in a relationship with Asian prices.”
Early estimates were that California would drop its plantings to 510,000 acres while Arkansas plantings would decline by 6 percent.
However, Brothers believes Louisiana rice acres could be down significantly, as much as 15 percent, with Mississippi down 8 percent. Texas rice acres could drop a lot more, maybe 25 percent, to around 150,000 acres. “They have water problems, they're not as competitive and they're struggling to stay in the rice business. Missouri is a very competitive area for rice production although acres could drop by about 7 percent.”
There is still significant divergence between long grain and medium grain prices, Brothers points out. “USDA has a projection of a $3.51 cash price per bushel for rice but high prices for medium grain rice in California are pushing up that price. If you took out the price of medium grain, USDA would be showing a lower number for long grain rice.”
Brothers noted that a 26 percent reduction in medium grain production in 2005 is behind higher medium grain prices. “We came off a year (2004) where California planted about 600,000 acres, going fence row to fence row because of higher prices. That effectively destroyed the market for the Californians. Prices declined and we dropped back to roughly 540,000 acres in 2005.
“At the same time that happened, Australia was going through its third year of drought. All these factors have made medium grain quite bullish. Carryout in medium grain rice is down 61 percent from the previous year.”
If you're thinking about increasing medium grain acres in response to higher prices, beware, says Brothers. “Australia is expected to have a normal crop in 2006, and they will place more medium grain on the market. This will put more pressure on California and the South.
While we need to grow medium grain in the United States, “if we overdo it, we have a problem. We have a limited number of markets and we can get in trouble quickly.”
If you do produce medium grain, consider what variety you need to plant. “We got a call from a major cereal account that it would no longer buy Medark rice. So if you plant Medark, you need to be thinking about selling it to something other than the cereal industry.”
Meanwhile, the United States “is off to a great start in exports, up 16 percent over last year.” Total U.S. rice export sales are up in both milled and rough rice categories. But the milled rice side is up 54 percent, according to Brothers.
Brothers noted that one important market, Iraq, “really wants to buy rice from us, but our prices are starting to be a problem. But I do think we'll have a chance to do some business with them.”
The biggest problem for U.S. rice exports to Haiti is the country's civil unrest, according to Brothers. “We worry every day that something is going to happen and disrupt shipments there.
The Bush administration continues to thwart sales to Cuba, “with the latest being changing payment terms, which offended the Cubans and has slowed business. We will continue to see business going to Cuba. But there could be more.”