Rice planting slumps as US farmers seek higher profits

Growers abandon the crop as prices advance for soybeans and corn

CHICAGO - Farmers in the United States are planting the fewest hectares with rice since 1989 just as global demand surpasses production for the first time in four years, driving prices as much as 12 percent higher by December.

Plantings in the US, the third-biggest shipper, may drop 25 percent this year because growers can earn more from corn and soybeans, according to the median in a Bloomberg survey of nine analysts and farmers. Rice, the staple food for half the world, declined 4 percent last year, extending a 2.9 percent drop in 2009. The other crops jumped 34 percent or more.

"Why would you want to take that risk to plant rice, knowing that your income is going to be way down?" said Terry Hatley, a farmer in Marked Tree, Arkansas, who may not plant any rice this year after growing the crop for more than three decades. "Farming is a business, and you've got to look at the economics of it. Now, the economics on rice are very dim."

Bangladesh, South Asia's biggest buyer, doubled a target for imports in 2011 to curb prices, the Directorate General of Food said last week. The Thailand export price, the benchmark in Asia, may climb as high as $600 a ton by December from $534 on Wednesday, a gain of 12 percent, according to the median estimate in a Bloomberg survey of eight traders, exporters and analysts.

Rice represents almost 50 percent of the food expenses of the poorest across the developing world, and 20 percent of total household spending, according to the International Rice Research Institute, based in Los Banos in the Philippines. In the US, 6 percent of incomes are spent on groceries, data from Euromonitor International show.

US farmers have little incentive to stick with rice. Prices in Texas, the sixth-largest producing state, are only enough to break even, according to Larry Falconer, an economist with Texas A&M University's AgriLife Extension in Corpus Christi.

Wheat, corn and soybean prices jumped last year because crops were ruined by Russia's worst drought in at least 50 years, parched fields in Kazakhstan, Europe and South America and flooding in Canada. Rice prices fell because of ample supply. Output in the US increased 7.6 percent to 7.44 million tons in the current marketing year, according to data from the US Department of Agriculture (USDA).

"The main problem, both now and in 2008, is whether countries will curb exports," said Milo Hamilton, the president of Firstgrain.com, a rice advisory service in Austin, Texas. "Twenty or 30 countries produce and export wheat, but I can look at my fingers and count the rice exporters."

When rice surged to a record in 2008, India and Egypt banned shipments, Vietnam barred speculators from its domestic market and China imposed export taxes.

Bangladesh doubled its rice import target to cool prices that surged to a record in December as consumers and farmers hoarded supplies, said Badrul Hasan, director for procurement at the Directorate General of Food in Dhaka. The goal was raised to 1.2 million tons for the year to June 30 from 600,000 tons.

Production in Thailand, the world's biggest exporter, will increase 0.4 percent to 20.35 million tons this year, according to USDA estimates. In Vietnam, the second-largest shipper, output will be little changed at 24.98 million, the data show.

Bloomberg News

(China Daily 02/01/2011 page17)