rice prices could be headed higher in 2017-18

U.S. rice producers could see higher prices for their 2017 crops – and it’s not mainly because of the losses due to the flooding that occurred in portions of Arkansas, Louisiana and California in late April and early May.

The die was already cast for lower rice supplies – and, thus, potentially higher U.S. prices – before unusually heavy rains in central Missouri caused rivers to leave their banks and flood nearly 200,000 acres in the northern Arkansas rice belt.

Related: Arkansas flooding toll may not be as bad as expected

“The long-grain rice price forecast is up about $1 per hundredweight – around $9.70 to $10.70,” says Nathan Childs, who follows the U.S. and world rice markets for USDA’s Economic Research Service in Washington. “This is based on without factoring in the flooding that occurred in Missouri and Arkansas.”

Dr. Childs, an agricultural economist with the USDA-ERS, was one of the speakers for the University of Arkansas System Division of Agriculture Rice Outlook Webinar on May 25. (To view Dr. Childs’ presentation, click on https://youtu.be/D9CjbB4CU_Q.)

Related: Louisiana rice acreage down 8 percent in 2017

“You can see prices have been dropping, dropping for a while,” said Dr. Childs, referring to a chart showing season-average prices for long and medium grain rice going back to the 1990s. “But now we’re beginning to see tighter supplies in this country and in some other parts of the world.”

No shortage of rice

That doesn’t mean there will be shortages of rice anytime soon. Although global rice production is expected to decline 250,000 tons to 481.5 million tons on a milled basis, 2017-18 global rice supplies are projected to be a record 599.9 million tons, which would be up 2.6 million tons from 2016-17.

look at the all rice ending stocks, and, as I said earlier, we came off three years of abnormally high global ending stocks with high stocks-to-use ratios of 24 percent to 25 percent,” he said. “That’s too high.”

The stocks-to-use has come down and is projected to fall below 20 percent in the 2017-18 marketing year. “We have a lot of rice,” said Dr. Childs. “Historically, we've said around 13 or 14 percent was a more desirable long-term stocks-to-use ratio.”

The U.S. crop was already forecast to be down about 10 percent on a metric-ton basis in 2017 before the flooding began having an impact in the Mid-South, including the states of Arkansas and Louisiana, and in California.

USDA’s National Agricultural Statistics Service was forecasting U.S. rice plantings would be down 17 percent in its March 31 Planting Intentions Report. (The forecast was for 2.63 million acres with most of the decline in the South and a slight decrease in California. Arkansas and Mississippi producers indicated the biggest declines.)

Prices in decline

“Prices at planting this year, say in March, were declining so U.S. long-grain rough prices were declining,” said Dr. Childs. “They have been rising in the last few weeks because weather is a big factor, but they were declining.” 

In contrast, prices for soybeans, the main alternative crop in the Delta, were rising at the time. “And in March, the U.S. carryout for the 2016-17 rice crop was the highest in more than 30 years. Now it's not as high now. We've dropped it a little.”

Meanwhile, total supplies are still projected the second highest on record. “So when farmers were looking at 2017-18 they saw declining long-grain prices, big carryout, big supplies but not record and higher prices for alternative crops.”

The weather and uncertainty in portions of the U.S. Rice Belt have altered that outlook somewhat, but the U.S. still faces record supplies in the rest of the world where it exports about half its rice crop. Dr. Childs reviewed the situation in a number of rice-producing countries.