U.S. Rice Sector Has Promising Outlook

NEW YORK, April 20 /PRNewswire/ — Two years after questions arose regarding the viability of the U.S. rice industry, the sector has emerged stronger and has a very promising outlook with total U.S. rice exports forecast to increase around 20 percent, according to a new Rabobank report, “U.S. Rice.”

“The outlook for U.S. rice growers remains strong, with more cause for optimism than concern. However, with global rice stocks already at low levels, prices are especially susceptible to any shocks,” said Food & Agribusiness Research and Advisory Vice President Michael Whitehead. “Adverse weather in a particular rice-growing region could be one cause of price increases, while a potential cause for a significant drop in rice prices would be a perfect storm of excellent and unimpaired growing conditions in the major producing countries.”


Despite attractive prices of alternative crops, U.S. planted rice acreage fell only 3 percent in 2007/08. This differed, depending on the class of rice, with medium/short-grain rice production up approximately 16 percent on the previous crop year, while long-grain rice was down about 3 percent.

Globally, rice production is forecast to hit a record 423 million metric tons (milled basis) in the 2007-08 crop year. In China, the largest producer of rice, production is likely to remain steady because there have been major productivity gains from super-high yielding plants despite some drought conditions. Many growers in Vietnam are also likely to see production levels unchanged. However, in Thailand, the largest exporter of rice, improved yields through good weather are likely to see production increase to 30 million metric tons in the 2007-08 crop year.

Global Exports

Total U.S. rice exports for 2007/08 are forecast to increase approximately 20 percent from the previous year — in part due to export restrictions imposed by Vietnam and India. In the United States, rough rice exports largely destined for Mexico and Central America, are forecast to improve 14 percent from the previous year. Additionally, U.S. milled rice exports are forecast to jump 25 percent; although still 10 percent below the 2005-06 crop year.

“U.S. export prices continue to experience upward pressure from several factors, including healthy sales, generally high commodity prices and the relatively weaker U.S. dollar,” said Whitehead.

Globally, the story varies. In Thailand, the largest exporter, the country’s share of global rice trade grew from 26 percent in 2006 to a projected 32 percent in 2007, but its rice stocks are likely to fall by around 10 percent. “Even though stocks are still at a reasonably healthy level, such a drop does not go unnoticed by the market, and could have upward pressure on prices,” said Whitehead.

In addition, 2007 exports fell in Vietnam, the world’s second largest exporter, and in Pakistan. In Vietnam, exports were suspended in November 2007 when the country reached its export ceiling. New export limits and taxes for 2008 may see Vietnam’s rice exports for 2008 fall by around 20 percent. Additionally, in Pakistan, exports are likely to fall almost 40 percent a result of a poor harvest and rising domestic prices.

In India, fears that high prices may hinder efforts to rebuild domestic stocks led to the imposition of export restrictions in the form of high minimum export prices, which effectively stopped the exports of all rice from India — except Basmati or high-quality non-Basmati rice. With little sign that these restrictions will be lifted in the near future, India’s rice exports may fall approximately 10 percent.


Prices in the rice sector have continued to rise in part due to strong global demand, the decreasing value of the U.S. dollar, increased attention from speculative investors and the recent global growth of biofuels. “Indisputably, the recent global growth of biofuels has influenced the price of rice in several ways. In the United States, competition for rice acreage has come from grains and oilseeds, boosted in price by biofuels or feed/food gap demand,” said Whitehead.

Major price increases were seen in aromatic rice, largely a result of limited supplies from India and Pakistan, as well as increased demand pressures from the EU and some Asian markets. In addition, lower-quality Indica rice prices also rose sharply, driven by factors such as domestic price increases in China and Pakistan, as well as import restrictions in Vietnam. While the post rice harvest period in many countries would normally ease upward pressure on prices, export restrictions or tariffs from a number of major suppliers including Vietnam, India and Egypt have made this less likely.

The involvement of funds in the rice sector continues to place upward pressure on prices. In the wake of last year’s strong global prices in grains and oilseeds, many new players that have become increasingly nervous about traditional equities have gained some understanding of agricultural commodities, but feel they may have missed the opportunity for strong returns on grains and oilseeds. With the strong outlook for rice demand, it is likely that new investors will continue to play a role in maintaining upward pressure on prices.

Source Citation   (MLA 8th Edition) “U.S. Rice Sector Has Promising Outlook.” PR Newswire, 20 Apr. 2008. Infotrac Newsstand, http://link.galegroup.com/apps/doc/A178051196/STND?u=fairfax_main&sid=STND&xid=e11f66a2. Accessed 24 Mar. 2019.