Letter To The Editor

To the Editor: 

U.S. rice is on the verge of losing a $345 million market: Central America. Ironically, now that U.S. rice ships duty free to most of Central America (the Dominican Republic and Costa Rica are also about to fully open their market with zero tariffs), the region is turning to alternative origins for rice imports. In fact, U.S. rice faces stiffer competition than ever. Exports to the region are swinging downward, with a 30 percent drop in U.S. milled rice exports in 2021/2022. It is very likely that even duty-free quotas will go unfilled. 

Did anyone anticipate the current market situation 17 years ago, when the U.S., Central American countries, and the Dominican Republic signed a free trade agreement to phase out duties on U.S. rice, among other things? 

The U.S. – which annually exports about half of its entire rice crop – counts on Central America (the second largest market for U.S. rice exports after Mexico) to buy about one-third of all U.S. rough rice exports annually. Central America, with a population of close to 54 million, consumes about 2.2 million metric tons of paddy rice. To meet this demand, these countries collectively import about 750,000 tons of paddy rice annually, valued at $345 million. U.S. rice was once a natural choice, given the ease of logistics and dependable, quality product. 

Price and economic conditions – but mostly the deterioration of U.S. grain quality – led Central America to start buying large quantities of rice elsewhere. Central American buyers warned the U.S. rice industry 10 years ago they would look for other sources of rice due to chalkiness, white belly, broken grains, and other factors affecting quality in hybrid varieties grown in the U.S. Once a loyal customer, Central American countries wanted better quality and better prices, so they increased imports from South America. Central America’s 2020 purchases from Brazil, Uruguay and Paraguay increased in year-on-year terms by 751%, 330%, and 218%, respectively.

Other market factors exacerbated these changes. COVID, the container crisis, the war in Ukraine and other situations caused countries to divert from previous commitments. El Salvador eliminated rice tariffs to combat its inflation and benefit consumers. Costa Rica lowered rice tariffs for all origins to 3.5% for paddy and 4% for milled. Honduras also modified its imports on a case-by-case basis. 

Dirección: La Uruca, San José, Costa Rica, del parqueo del Hotel San José Palacio, 500 metros este. Tels.: (506) 2520-2086 | E-mail: direccion.ejecutiva@fecarroz.co | www.fecarroz.co

Federación Centroamericana del Arroz