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All Things Rice
Roberts Relays Rice Market Situation On The Horizon
Dwight Roberts, president and CEO of the US Rice Producers Association (USRPA),
explains only two things are important to rice farmers – weather and price.
Photo by John LaRose, Jr.
BETTY VALLE GEGG-NAEGER
MidAmerica Farmer Grower
PERRYVILLE, MO.
Only two things are important to rice farmers - weather and price. That’s the opinion of Dwight Roberts, president and CEO of the US Rice Producers Association (USRPA).
“Everything else is secondary,” he said. “We are in the midst of historically low prices right now, especially if you take into account the cost of production and equipment. The current prices talked about at the farm are as low as they’ve ever been in history when compared to the cost of producing a crop today, so it’s a difficult marketing year for rice farmers.”
The bottom line is if you look at the rice numbers, stocks, production and so forth, the United States has high stocks, and that is a recipe for today’s situation. Last week’s USDA report projected a final carryover number for 2015 at 23.6 million cwt which is significantly lower that its first projections and this helps market signals. World carryover stocks were reported at 90.5, but many in the trading community believe it will be lower as Thailand continues to address and adjust their inventory. In general the demand for rice in the world is low and this is keeping prices low.
“What little bullish market information there is didn’t overly excite the market, but the market is still definitely very soft right now,” he continued. “However, the outlook is a little more encouraging; things that can change the price of rice, of course, are business with Iraq, such as the United States did recently by winning a portion of the 60,000 tons on the most recent Iraqi tender. We’d like to see more and I understand there is an Iraqi delegation coming to the United States soon to discuss a possible agreement for more business.
“We all know that Iraq does consume about 100 thousand tons every month and that has to be imported; so that’s an area that could really support firming of the market,” Roberts said.
“Unfortunately, we don’t have very many exporters willing to make bids on that tender and that’s a different subject,” he added. “Other things that I’ve heard just recently is that business with Iran could get a boost from the new agreement on the nuclear arms deal. That also has implications with the current economic embargo with Iran. The United States recently sold rice to Iran and this is definitely a boost to the market to start off with this new harvest season.”
Venezuela is also a country USRPA is watching. The problem is nobody is going to load the vessel without being guaranteed payment first. Venezuela continues to need large amounts of rice and U.S. prices are attractive for any buyer.
Other things that can help firm up this market is the weather. Some areas of the world mark this current system an El Nino, and nobody really predicted that. So for the first time in a number of years Texas and the south are having a wetter summer (despite dryer weather the past 3 weeks), which is one sign of an El Nino. Some parts of South America are having excessive moisture; then there’s also some extreme dryness, drought conditions in southeast Asia, which is another result of the warming of the Pacific Ocean.
Those dry conditions are mostly in Thailand and a little in Vietnam. The El Nino affect in India is not near as strong the last 8 or 10 days; they’ve had some sizeable rain. When you get drought conditions in southeast Asia where a lot of the rice is upland rice, not irrigated, that immediately changes everything.
“We’re not used to that in the United States because 100 percent of our rice is flooded, or irrigated, but you have to realize a lot of these countries produce rice in the uplands, and their moisture is based on the monsoon rain season; if the rains don’t come everything changes. Prices are firming up; if this weather pattern continues, the bigger exporters like Thailand and Vietnam will see an effect on their prices and that will have a positive influence on the United States. That’s definitely something to watch,” Roberts said.
Cuba and China can also impact the rice situation here, however, unfortunately, U.S. rice will not be sold to Cuba anytime soon.
“We’re very happy that the issue with Cuba has been in the news; it’s good that Americans are more aware,” he said. “But that didn’t happen overnight; less than a month ago there was an announcement of normalization and establishing embassies in both countries. That’s wonderful, but there’s no change in the rules for doing commercial business.”
President Obama has done about all he can to change thinking, financial regulations, the ability to offer credit, but all those things with Cuba can only be passed by Congress. The travel ban is still in place. Obama has broadened the terms of licensing under the people to people cultural education exchange, with many, many more Americans visiting there.
“I was in Cuba in late April, and Missouri sent a group with the governor there in early March; and when I was there in late April, there were many older retired Americans from San Francisco and New York and everywhere else visiting there,” he reported. “They were there on these educational programs which have been broadened. What that means is you sign up with a group that’s going on some cultural exchange and you keep notes about what you did and saw and you have a prearranged itinerary that must be adhered to; you can’t go without a previously arranged itinerary, you cannot go to Cuba on vacation. Americans cannot just buy a plane ticket and spend the weekend at the beach.”
There are soccer teams, baseball teams and other such groups from the United States visiting Cuba in an educational exchange program. However, the only process to lift the travel ban for individuals is through Congress.
“Like any commercial business, you can’t use a U.S. credit card when you go to Cuba,” Roberts said. “All those kinds of things can be changed by Congress. The Cubans have made it very, very clear that they have to have credit which is not uncommon in international trade. And they are getting credit from other suppliers whether out of Brazil, Argentina, Vietnam or Equador. We’re making progress on Cuba, it’s a very, very slow pace. What’s important for farmers is to be able to ship rice there and we still have a ways to go,” Roberts said.
“We’re members of an important USA/Cuba coalition, and just about every agricultural commodity group that exists in the United States is involved in it. There are others pushing for change too outside of agriculture. We continue to exchange information with the Cubans, I had my big western hemisphere conference in Cancun a month ago and Telce Gonzales from Cuba came to speak; so we’re looking forward to doing some activity in Cuba when the rules of the game are a little easier to follow. On paper it’s easier for you to go to North Korea or Iran than it is to Cuba,” he reported.
China continues to be the world’s largest rice importer. The world prices, especially of their neighbors, are extremely attractive. The Chinese can’t grow rice as cheap as they can buy it and the Chinese government subsidizes its farmers. Then there’s the issue of water availability.
“China is the biggest buyer of rice for the masses in China; as far as the United States, efforts to market rice there have been going on for several years. There’s an effort to establish a phytosanitary protocol ongoing right now even as we speak,” Roberts said.
“Years ago the US Rice Producers went to China, did in-store tasting, and surveys and they told us the Chinese consumers, especially in the higher income bracket, would love to get their hands on U.S. rice if it was available, even if it costs more because they respect the quality of U.S. rice. Fast forward to today, we’re down to the final chapter on this in my opinion. There are two items that are the last pending ones, one has to do with pests, insect trapping requirements. Some in the United States think it’s impossible, but I talked to the leading entomologist in the country and they say it’s not a problem at all to put these traps up and monitor them.”
The other item contested in this proposed agreement between China and the United States is that the Chinese want the specific variety named on the package. They want high quality, specific variety rice that is not commingled with other varieties.
“Unfortunately, we had a conference call with APHIS a month ago to discuss these points, and the representative of the Rice Federation could not comply with that because rice is so commingled in the Delta,” Roberts reported. “I just think we’re avoiding the issue of selling the customers what they want. So we’re trying to work through the variety specific packaging. We’re talking quality here, this is what the market has been calling for, especially since 2010; it’s what the Central Americans have been screaming about, the buyers down there don’t like to get shipments of rice with 20 different varieties mixed in it. The different varieties cook different, they have different sizes and lengths; paddy rice mills differently and so it doesn’t cook the way other varieties do. I fully expect that the two rice organizations will work through all the aspects of the protocol and we will have something worth signing off on before the end of September at the latest. Maybe before the end of August even.
“We saw this happening in 2010 and now it’s fairly commonly known that the term ‘identity preserved’ is the way the market is going,” said Roberts. “Buyers and sellers play the price game and can undercut, but more and more we’re seeing the buyers, even in their contract, specify they only want these varieties on their barge or vessel,” he reported.
Even in the United States, imported rice is now just over 20 percent of all the rice consumed here, showing that people prefer single variety rice. The consumption of U.S. grown rice continues to be flat as it was 25 years ago. At that time, imported rice was probably 2 percent or 3 percent of the U.S. consumption. Rice in U.S. stores comes from Thailand or India, and it’s all specialty rice, which is the fastest growing market in the world.
“I was surprised talking to a Brazilian to learn about the growth of specialty rice in Brazil,” he said. “I knew it would happen but I didn’t know it was going on as strong as they told me when I visited there.”
The United States imports over 700,000 tons a year now, almost as much rice as is shipped to Mexico, the U.S. number one long grain market.
“This is disturbing to rice farmers in the United States, but, in my opinion, it all goes back to selling the customer what he wants,” Roberts said. ∆
BETTY VALLE GEGG-NAEGER: Senior Staff Writer, MidAmerica Farmer Grower
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