Opportunities for U.S. rice exports

The current rice market is cramped, with more rice in projected carry-over than in previous years. “We are still in a very tight situation. We’re in a bubble and if there are any problems in any of the major rice-producing countries, things could change rapidly,” said Riceland Foods’ Carl Brothers. Regarding international politics and economics, rice remains king — the food staple of the world. Rice production worldwide is at 439 million metric tons, with the U.S. producing 2 percent of that total. However, U.S. rice producers play a far greater role in the rice trade than the 2 percent tag implies. U.S. rice significance carries tremendous weight in regard to the export market — as the third largest rice exporter in the world. As recently as 1980, the U.S. was the No. 1 rice exporter globally, but is now ranked behind Thailand and Vietnam. Despite ever-increasing tons of rice produced, only a small percent is traded internationally. As glaring examples: China and India are the two largest world rice producers, yet their domestic consumption leaves little for export. Speaking at the Mid-South Farm & Gin Show, Memphis, Tenn., Carl Brothers presented an update on the condition of the world rice market, and detailed opportunities for U.S. rice producers. Brothers, senior vice president, Riceland Foods, Inc., Stuttgart, Ark., says the current rice market is cramped, with more rice in projected carry-over than in previous years. “We are still in a very tight situation. We’re in a bubble and if there are any problems in any of the major rice-producing countries, things could change rapidly, as happened in 2008, when concerns took prices to over $1,000 per ton.” The outlook for U.S. rice continues to be brighter for medium-grain. Despite overall planted rice acres in 2009 up 5 percent, long-grain acreage dipped 3 percent, and Brothers says medium-grain compensated for the long-grain drop. “Total U.S. long-grain acres were down 3 percent. If you turn and look at medium-grain acres, the picture is quite different. We doubled our medium-grain acreage in 2009 — going from 101,000 up to 226,000 — a 124 percent increase.” Louisiana played a significant role in the medium-grain gains, with acreage increasing 267 percent. Despite Southern medium-grain increases, California medium-grain quality continues to dominate the U.S. market. California’s 2009 medium-grain crop, while not a record, was substantial and continues to draw high prices when matched up against the South’s product. Why? “They’ve got a better product than we have ... I really hate to say that, but if you compare the California Calrose with the Southern medium-grains being produced, there is a big difference. “If you were going in and buying them yourself, I think you would choose the Calrose. We’re working with experiment stations to address that, and would like to get closer to California quality with the product that we produce in the South,” says Brothers. The high-quality Calrose allows California entrance to foreign markets not accessible to Southern medium-grain. “The Japanese are not interested in Southern medium-grain. The Taiwanese, although we got a small amount in there this year, are not very happy with it. I think they mostly bought trying to break the California market.” Even with California dominance, the increased Southern medium-grain acres have found a buyer in close proximity — Puerto Rico. “We will supply Puerto Rico this year and that’s going to be the savior of the almost doubling of the size of the Southern crop. Puerto Rico will return to the South for their medium-grain needs and that will pretty much clean up the Southern crop, although there will be medium-grain carried over, but principally in California.” Brothers noted that Puerto Rico consistently buys its rice from the cheapest source available. But with the vagaries of the global rice trade — a prolonged Australian drought, an Egyptian export ban, and a Chinese pullback — the Puerto Ricans have turned to the U.S. for rice. “Most of that rice is coming out the Southern United States and not California.” Rice opportunities • Iraq remains a key for U.S. rice exports, according to Brothers. In January, the Iraqis balked after Thailand overvalued its rice crop, resulting in an Iraqi purchase of 100,000 metric tons from the U.S. Iraq is currently looking to buy again. Brothers says prices have been offered to the Iraqis and a response is forthcoming. He is not confident of a spring rice sale to the Iraqis. “We’re probably not quite as optimistic about Iraqi business as we were the time before. The time before was right in the period when the Philippines was buying up rice for their shortfall and excited the Asian rice crop. The Thais got pie-in-the-sky ideas about what the value of their rice was, and they let us slip in. “I think that will be one of the best U.S. sales all year — the previous one to Iraq. But this time the feeling is the Thais have woken up.” • In addition to Iraq, Nigeria is a strong focus of the U.S. rice industry. During the 1980s, Nigeria was a strong importer of U.S. parboiled rice. With incessant political instability and a population of over 150 million, domestic rice demands march in tune with Nigeria’s economic pulse. Higher rice prices in Asia have factored heavily on Nigerian import decisions. “Nigeria has been a welcome return for us ... We lost that market to the Asians. With the Asian price run-up in recent months, they’ve returned to the U.S. and I hope we can catch them on our quality — seeing a difference — and we can take over the Nigerian market.” • In Europe, the hurdles for U.S. rice continue to revolve around the GE controversy. Brothers says a reasonable tolerance policy is needed when testing for GE identification. With common conveyance and shared harvesting equipment (rice, corn, wheat and cotton fiber) the probability of positive GE readings remains high. “These tests are so sensitive they are going to pick that up. So we need a low-level presence policy, which basically I would call it a tolerance. They don’t call it a tolerance — no GE being allowed in Europe — so they call it a low-level presence policy,” details Brothers. A low-level presence policy would afford the U.S. valid latitude in accounting for traces of genetically engineered products. For U.S. rice producers, it would offer a variance from Europe’s zero tolerance of GE products — essentially interpreting zero as 0.1 or higher. “The first thing they’ve suggested they would do would be to find a technical answer ... What they’re suggesting is to further define zero as 0.1, 0.2, 0.3. If we could get that type of low-level presence, I think we would have a greater opportunity to get our product into the European Union. So we are going to keep pushing on that.” • As for Cuba, diplomatic channels continue to clog. Despite rumors of agreements and relaxations, no benefit to U.S. rice growers appears imminent. “Cuba is slower moving than we’d like. There are several deals in Congress suggesting a relaxing of the situation, mostly about travel and payment. The Cubans got really irritated with us when we typed up the payment restrictions about a year and a half ago, and they haven’t bought anything from us since. “They are just upset with us and our politics. We think the atmosphere is the best that it can be to see something happen with Cuba,” states Brothers. • Regarding Brazil, Brothers says weather, similar to what U.S. growers dealt with last year, had a heavy impact on the 2009 Brazilian crop. He believes Brazil will curtail exports and hold rice for domestic consumption — a boon to U.S. traders. “They’ll empty out Argentina, Uruguay, and then lastly they’ll come to the United States for rice. If that were to happen, I’d expect it to happen in mid to late summer. That one is worth watching.” Questions always linger in the global rice market, but U.S. growers have confidence in their product. Rice continues as a bellwether crop, unique in its relation to political climates. Brothers believes U.S. producers must be vigilant and continue moving forward. “No one stands still, and we’ve got to keep getting better; keep increasing our yields, lowering our costs, doing everything we can to stay competitive. The Asians are after our business and we’re going to have to fight as we go along. If we relax at any time, then I think we get run over. “The numbers that I see from the rice industry look very promising for continuing to grow rice, protecting our infrastructure, and employing people. We’ve seen some other industries struggle in that respect.”