Rice -still considered aa third-world crop is turning into another example of US agricultures's ability to capture new markets. Yet US rice producers' increasing reliance on overseas markets is not always a case of extra earnings -which last year added up to $1.5 billions. The other side of the coin is that shifting trade patterns mean that American rice farmers' incomes depend not only on their own skills, but also on such variables as weather conditions affecting India, Indonesia, China, and South Korea.
Just two years ago, 63 percent of US rice flowed into overseas markets. This year, the US Department of Agriculture expects that other countries will cut their purchases back nearly to 1978-79 levels, which means only about 45 percent of rice production will go to overseas customers. Thus, in response to a dramatically increased crop, US farmers are seeing the price they receive for their rice dropping steadily, with no bottom in sight.
In world terms, US rice production remains small. On a rough (unmilled) basis , this year's record US crop of 8.1 million metric tons compares with an expected record world rice crop of 408.7 million metric tons.
Despite the fact that US farmers produce only 2 percent of world rice supplies, with steady gains in exports, American rice accounts for more than 20 percent of the world trade. But due to record crops in Asia, overall rice world trade is expected to drop to just 12 million tons for the 1982 calendar year. That is down from 1981's 13.2 million and down from the 12.7 million forecast for 1982 earlier this year. The revision affects US farmers, who are expected to provide 2.6 million tons (milled basis) rather than last year's 3 million tons, an export sales record which US producers had hoped to top in 1982.
A combination of domestic and international factors in late 1980 and early 1981 resulted in American farmers planting a record 3.86 million acres in rice. Last year's high prices, combined with factors such as a late winter wheat harvest, meant many farmers switched from soybeans or cotton to rice. Good growing conditions mean that harvested acreage is expected to be 3.82 million, up over 500,000 from a year ago. Favorable summer weather across the southern and western rice growing areas also attributed to top yields.
But based on its regular monitoring of world crop prospects, the US Department of Agriculture (USDA) reports that "normal monsoons in Asia and timely rainfall in South Korea," came at a bad time for American rice producers. US officials expect significant expansion of rice production in China, Indonesia , Japan, Brazil, and South Korea.
The effect on US rice prices has been dramatic. The USDA reports that "US average prices for rough rice during January-May 1981 ranged from $13 per hundredweight in February to a seasonal high of $13.80 in April." This year's early strength in rice prices encouraged additional planting, followed by a growing realization that rice supplies were moving towards new records both on the domestic and world markets.
The USDA now warns that increased supplies and reduced utilzation suggest that rough rice prices will drop in 1981-82. The seasonal average price rice 1981-82 is expected to fall between $9 to $11 per hundredweight, well below the 1980-81 average of $12." Given this prospect and the current average price of $ 11, USDA officials are surprised and concerned to find that "farmers seem to be holding on to their rice. . .feeling that something might develop to turn the market around."
The USDA does not expect a price improvement and is preparing to make deficiency payments to qualifying farmers if the average August-December price drops below the government's $10.68 target price.
Continuing low prices appear guaranteed for another year due to the prediction that the United States will end the current marketing year next July with 56.4 million hundredweight or 1.85 million tons of unsold rice -up from 1981 ending stocks of 16.5 million hundredweight or half a million tons.