California Rice Remains Strong While U.S. Long-Grain Industry Sees Declining Acreage and Demand, Says Rabobank
Thursday, June 21st, 2012
Despite an almost 30 percent reduction in U.S. rice plantings in the last two years, California rice growers have managed to keep their acreage steady and product demand strong. The findings come from a report released today by Rabobank’s Food & Agribusiness Research and Advisory (FAR) group.
The report, titled “U.S. Rice: A Sticky Situation,” shows that California rice growers have uniquely positioned themselves to maintain high demand by focusing on strong markets – specifically short- and medium-grain rice – along with establishing an identity preservation program that promotes quality. These factors, along with favorable weather conditions, ample water supplies and excellent soil conditions, have allowed California growers to benefit from high prices. California rice accounts for approximately 20 percent of U.S. rice production.
“California rice growers and millers have created a great system and as a result, a great niche for themselves,” said James De Jong, agricultural analyst with FAR and author of the report. “They have a market-driven approach that has allowed them to remain competitive by providing the right varieties and quality for their customers.”
The main purchasers of California rice include Japan, South Korea, Taiwan and Turkey, which all have high quality standards for medium- and short-grain rice. The Rabobank report delivers a comparison of California rice to other regions in the U.S. that have focused on long-grain rice production. Weaker demand for such long-grain varieties along with quality problems and unfavorable weather conditions in recent years has led growers, most in the southern U.S., to decrease rice acreage in favor of other crops that provide better returns and prices. Additionally, growers outside of California are facing stiffer competition abroad, where exports of long-grain rice from key countries have grown dramatically due to increased efficiencies and improvements in quality. Such countries include Vietnam and Thailand, along with several others in South America.
While weather is unpredictable, De Jong says that the long-grain rice industry can also compete with other markets as California has.
“The long-grain industry will need to do some heavy investing, focusing on ways to develop varieties that have high yields and high quality,” said De Jong. “Furthermore, long-grain rice farmers will need to work to change how they grow, handle, store and ship rice.”
Off the farm, long-grain rice varieties would need to be kept in separate dryers and storage containers. Millers would have to process each variety separately and ship them separately. Recently, the U.S. rice industry has created a task force to address these concerns. The group’s recommendations are not yet available, but among the suggestions may likely be a move toward an identity preservation program that has similarities to California’s.
In the medium term, California rice growers should continue to see plantings over 500,000 acres and expect to retain a price premium over U.S. long-grain rice – notwithstanding competition from rice exporters in Australia and Egypt.