Prices and optimism on the rise for rice farmers

Issue Date: April 16, 2008

California farmers are busy preparing fields for a projected 500,000 acres of rice this year. While they're receiving higher prices, they're also faced with higher input costs.

By Robyn Rominger

Tight world grain supplies and a weak U.S. dollar have driven up rice prices, boosting optimism among California farmers as they begin to plant their rice crop.

With rice prices continuing to rise, the U.S. Department of Agriculture is estimating that California farmers will plant more rice this season.

"Prices are really strong so growers are happy about that," said Tim Johnson, president of the California Rice Commission in Sacramento.

"Rice prices are stronger than they've been in a really long time--whether that's enough or not is based on what our production costs are this year," he added.

In 2007, the average price was $13.30 per hundredweight, up from $13 per cwt. in 2006 after everything was marketed, according to the USDA National Agricultural Statistics Service.

"It's up slightly by comparison, but in 2005 it was $10.10," said Jack Rutz, deputy director of the USDA NASS California Field Office.

"The $13.30 is a preliminary price based on early marketing, so it's subject to change," Rutz added.

Indeed, some growers report the price has reached $15.50 per cwt.

"It's $9.50 over loan this year," said Yolo County rice grower Tim Miramontes, who also serves as president of the Yolo County Farm Bureau. "I wish I had more acres to plant."

When a grower goes to their local USDA Farm Service Agency office, they receive a rice-production loan of roughly $6 per hundredweight. When the crop is harvested, the rice buyer pays the $6 per cwt. back to the USDA and then pays an additional amount to the grower; thus, the additional amount that Miramontes said he is receiving is $9.50 per cwt.

According to the USDA NASS estimate, California growers are expected to plant 549,000 acres of rice this season, up from 533,000 acres in 2007.

Of the total estimated acreage, 475,000 acres is medium grain, 65,000 acres is short grain and 9,000 acres is long grain rice.

"I think most informed industry observers consider that acreage to be too high," said Mike Sandrock, president and chief executive officer of the Sacramento-based Farmers' Rice Cooperative. "Most people think it will be closer to 500,000 acres."

Fewer acres may be planted to rice due to strong prices for alternative crops such as wheat, safflower and sunflowers, he said.

"In addition, we have the question of water sales, which have yet to be finalized," Sandrock said. "By our estimation, approximately 30,000 to 40,000 acres could also be lost due to water sales. The Glenn-Colusa Irrigation District has an option pending on water and there are sales pending in Butte and Sutter counties. And it's our understanding that the Conaway Ranch has informed their tenant growers they'd get 50 percent of their water."

Miramontes, who grows rice on the Conaway Ranch in Yolo County, said, "Landowners in the rice-growing region are selling water to water districts down south because they can make more money than they can renting farm ground."

Miramontes is going to plant only 150 acres of rice this year, down from 300 last year. He plans to increase his acreage of safflower and wheat, partly because "the price went up" for those crops and there will be less water available for growing rice.

Despite high rice prices, profitability remains one of the biggest challenges for growers due to rising input costs, including the minimum wage, which increased to $8 per hour this year, up from $7.50 last year.

"The price of fertilizers has basically doubled since last year and fuel has doubled," Miramontes said. "We have higher wages now and all the chemicals, herbicides and what-not have gone up. There are more options for making money out there, but it's getting eaten up by all the inputs."

Growers have various ways of coping with the rising input costs.

"I try to do more personally instead of hiring people to do it," Miramontes said. "And I look for the best deals on chemicals."

Factors contributing to the high prices include lower supplies and greater demand.

"The stocks for most major grains are very low," Sandrock explained.

Part of the reason is that more acreage has been planted to corn for ethanol production and less to rice and other crops.

"In addition to that, there are events happening internationally that have further accelerated the increase in rice prices," he said. "A number of countries have imposed bans on exports to protect local prices. One country of interest to California is Egypt, which imposed a ban on rice exports between now and their new crop in October. The Indians have established a $1,000-per-ton minimum export selling price, again to protect local consumers. The Thais and Vietnamese, which are the No. 1 and No. 2 rice exporters internationally, have extremely tight stocks presently--and it's very difficult to get a quote out of Thailand."

In addition, for the past five years, Australia has endured a drought "of biblical proportions," Sandrock said. "This year's production is being projected at 1 percent to 2 percent of normal. Their crop will be harvested in the next 45 days and they won't have another crop for another year."

He added that Australia, which produces medium grain rice, "is trying to buy rice anywhere they can buy it right now, including the United States--that's why it's of particular interest to the California grower."

Meanwhile, demand for U.S. rice exports has increased due to the weak U.S. dollar, which makes U.S. products more affordable overseas.

Sandrock said the weak dollar has increased exports mainly to Europe, the Middle East and the South Pacific. It has had minimal impacts on California's major export markets of Japan, Korea and Taiwan because they're members of the World Trade Organization.

Johnson noted that domestic sales of California rice remain strong, due in part to the popularity of Asian cuisine and the affordability of rice. "Rice is still the best deal on the plate at 6 cents per serving," he said.

In terms of production issues, Chris Greer, University of California Cooperative Extension rice farm advisor in Sutter, Yuba, Placer and Sacramento counties, said, "One thing that is significant--there seems to be a pretty steep decline of M-202 acreage, which was pretty much the big Calrose variety. I think that decline is related to M-205 and M-206 displacing it. M-205 is for use in warmer areas and M-206 for cooler areas."

Miramontes, who will begin planting his rice in May, intends to grow M-206. "M-206 is becoming more popular, especially for people in the Woodland area, because it withstands the cooler weather better," he said.

Greer also said experiments on no-spring-tillage will continue this season in an effort to control weeds and reduce labor and diesel costs. "The no-spring-till system of planting is done with either drill-seeding or water-seeding. That's the one we've been doing at the research station for three years. We have good data. We're trying to expand it to on-farm experiments this year. We're trying to find 10 locations in consultation with the growers."

Regarding legislation, the federal farm bill is a major issue for the rice industry. On March 14, President Bush signed Senate Bill 2745 into law, extending the Farm Security and Rural Investment Act of 2002 through April 18. Farmers continue to wonder if a new farm bill will be enacted for the next five years.

Johnson said, "Are we going to have a new farm bill and what will it look like? We won't have another answer for another month. It's really uncertain at this point what the farm bill will look like, or if we'll have one or just an extension of the current one."

The rice commission is also actively working on state issues.

"Other issues the rice industry is monitoring include the Global Warming Solutions Act passed in 2006, which requires the state to reduce its greenhouse gas emissions," said Paul Buttner, the commission's manager of environmental affairs. "Rice farms generate moderate amounts of greenhouse gas in the form of methane and nitrous oxide. The rice commission is engaged in a research project to assess industry-wide emissions and opportunities to voluntarily reduce greenhouse gases. This project is being funded under a grant from the Natural Resources Conservation District."

State Air Resources Board regulation of diesel emissions is another area of concern to growers.

"Working within a coalition of agricultural groups, the rice commission is monitoring ARB activities to address emissions from on-road diesel trucks," Buttner explained. "The ARB currently proposes to require replacement or retrofit of trucks that do not meet 2007 emissions standards. The regulation has not yet been adopted and the rice commission expects adoption by late 2008 or early 2009. This regulation will not affect tractors. However, after adoption of this on-road regulation, it is anticipated that the air board will then develop a regulation affecting diesel farm equipment."

(Robyn Rominger is a reporter in Winters. She may be contacted at robynrominger@hotmail.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item. Top