U.S. RICE PRODUCERS STRUGGLE AGAINST WORLD MARKET COMPETITION.

Rice is a minor crop on the national map, but it is of major importance in the South and in parts of the West. U.S. rice producers plant slightly more than 3 million acres annually. The national average yield in 2000 reached a record high of 6,278 pounds per acre, up sharply from 5,866 pounds in 1999.

Arkansas is the largest rice-producing state, with 1.42 million acres planted in 2000, accounting for 46 percent of total U.S. rice acreage. California is second, with Louisiana rounding out the top 3. These three states plant 80 percent of the nation's rice.

Rice prices have declined sharply in the last couple of years. The U.S. average rice price was just over $6 per hundredweight (cwt) last season. Prices averaged nearly $10 per cwt as recently as 1997-98. Prices are expected to decline in 2000-01 -- probably dipping slightly below $6 per cwt for the crop year.

Relatively weak rice prices are forecast despite a 13 percent acreage decline in 2000 that dropped production by 7 percent. For most U.S. crops, lower production would mean a brighter market outlook, but weak world rice market fundamentals trumped the more positive domestic supply/demand situation.

Exports normally account for about 40 percent of total U.S. rice usage. Even though the United States is a very small player in world rice production, it is the fourth largest rice-exporting nation in the world. Thailand is the largest exporter, followed by Vietnam and China. Large crops in these nations -- along with weakness in total world import demand -- have dropped world rice prices to the lowest level since 1993.

A steep decline in import demand from Indonesia and the Philippines has contributed to the weakness in the world rice market. Ironically, the decline in these key Asian importing nations has occurred despite economic recovery in the region. During the financial crisis in the region, Indonesia aggressively boosted rice imports to provide heavily subsidized food for the population. With the return to more normal economic conditions and increased domestic output, Indonesia has scaled back its huge rice import program.

U.S. rice acreage is likely to increase slightly in 2001 despite weak market prices. Hefty government subsidy payments and a lack of attractive alternative crops will support steady to slightly higher rice acreage this spring. Rice plantings are expected to be at 3.1 million acres.

Rice prices are forecast to improve slightly next season. Carry-over stocks are adequate but certainly not excessive. If world demand were to improve modestly, the U.S. outlook would brighten substantially.

Source: Doane economists