RICE YEARBOOK -- SUMMARY December 17, 1997 December 1997, RCS-1397 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published annually by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete text of RICE YEARBOOK (RCS-1997) will be online when available. Printed copies will be available in February, 1998. ----------------------------------------------------------------------------- U.S. Rice Prices To Continue Strong in 1998 U.S. rough rice prices are projected to remain firm for the rest of the 1997/98 marketing year (August/July), due principally to strong domestic and export demand and continued tight supplies of high quality long grain rice. Through the first 4 months of the marketing year, U.S. farm prices averaged $9.89 per cwt, up from $9.76 a year earlier. The high prices are partly due to very strong U.S. rough rice exports early in the marketing year. Continued strong demand is expected to maintain the season average U.S. farm price between $9.25 and $10.25 per cwt, with the midpoint just 15 cents below last season's average of $9.90. The 1996/97 price was the highest since the $12.80 reported in 1980/81. Season average farm prices have exceeded $9.00 since 1995/96. World trade is projected to be 19.2 million tons in 1998, up 5 percent from 1997 and approaching the 19.5 million traded in 1996. The robust trade is partly due to weather-related difficulties in certain regions associated with this year's El Nino effect--most importantly Indonesia and the Philippines. In addition, El Nino impacts have been responsible for greater imports in second-half 1997 by several countries in Latin America, a major market for U.S. rough rice. In contrast to the continued strong farm prices, prices for U.S. long grain milled rice have declined since late summer and are below a year earlier. Prices for medium grain milled rice have been flat since early 1997 after dropping for over a year. The devaluation of the Thai currency that began in July caused Thai prices to plummet this summer and autumn to well below early summer levels. The decline partly explains why U.S. milled rice prices softened this summer even though total U.S. exports and domestic use are projected higher than in 1996/97. With U.S. export prices for long grain milled rice essentially flat since August, the U.S. price premium over Thai rice widened substantially as the Thai price fell, making the United States uncompetitive in a number of markets. However, strong growth in world demand--especially in Asia--in 1998 will likely limit any long term decline in international prices. For 1997/98, world rice production is projected to be a record 382.7 million tons (milled basis), up almost 3.8 million tons from 1996/97. World consumption is projected at 381 tons, also a record and up 5.1 million tons. With production exceeding consumption by 1.7 million tons, ending stocks are projected to rise 3 percent to 54.9 million tons. The offsetting combination of larger global stocks and record use result in a stocks-to-use ratio of 14.4 percent, slightly above a year earlier, but still low enough to make prices sensitive to any production shortfall in a major consuming or producing country. U.S. 1997 Crop Posts 5-Percent Gain Based on November 1997 yield and area estimates, the 1997 U.S. rice crop is forecast at 180 million cwt, up 5 percent from last year. Greater planted area more than offset a small drop in average yield from the 1996 record. Long grain production is projected at 125.8 million cwt, up 11 percent from 1996. In contrast, the combined medium/short crop is estimated at 54.1 million cwt, a 6-percent drop. U.S. rice plantings are estimated at almost 3.1 million acres, up nearly 9 percent from 1996 as rice prices--especially for long grain --were relatively high compared to alternative crops and historic rice prices at planting time. Long grain area is up 15 percent, while the combined area for medium and short grain is projected to drop 7 percent. All States except Texas reported greater planted area and larger crops. The national average yield is forecast at 5,926 pounds per acre. Although down 3 percent from the record 6,121 pounds in 1996, the yield is still the third highest on record. The decline is largely due to late planting along the Gulf, delayed emergence in much of the Delta, and a shift in share of total area to the lower yielding southern long grain rice. In contrast, record yields were achieved in California largely due to generally excellent weather during planting, growing, and harvesting. Expanding Use Keeps Ending Stocks Low A projected increase in U.S. exports and record domestic food use are expected to lower 1997/98 ending stocks to 26.2 million cwt (rough), more than 3 percent below a year earlier, even though total supplies are up almost 5 percent. The stocks-to-use ratio is projected to drop to 13.7 percent from 15.1 a year earlier, making the ratio the second lowest since 1980/81. On a marketing year basis, 1997/98 U.S. rice exports are projected up 9 percent from last year to 83 million cwt (rough basis), but below the record 99 million of 1994/95. Rough rice exports--with Latin America accounting for the bulk of shipments--are projected to expand at a faster pace, rising almost 20 percent to 15 million cwt. Greater supplies and lower prices are behind the outlook for expanded U.S. exports. On a calendar year basis, U.S. rice exports are forecast at 2.8 million tons (milled basis) in 1998, up from 2.4 million in 1997 but below the 1995 record of almost 3.1 million. Even with world trade expected to increase, the market share for U.S. rice is projected at 14.6 percent, above this year's 13.1 percent, but well below the 17-percent average for 1990-95. Latin America, Canada, the Middle East, Europe, and Japan are expected to remain important markets for U.S. rice well into the next century. U.S. exports in 1997/98 and market share in 1998 will depend primarily on how much rice is available for export after domestic demand is met. To a lesser extent, exports will depend on the U.S. price premium over foreign competitors' prices--particularly those of Thailand, the major competitor in high-quality markets--and the subsequent reaction of buyers in price-sensitive markets. But because the United States is the only major exporter that allows rough rice exports, it will likely face little competition in this growing markert. The Rice Yearbook contains a special article that examines three statistical relationships used for projecting annual U.S. rough rice prices based on various measures of world price and domestic stocks-to-use ratios. The article also discusses changes in the U.S. and world rice markets that have contributed to the recent higher U.S. and world rice prices. Printed copies of the Rice Yearbook will be available in about 2 weeks. For more information, contact Nathan Childs (202) 694-5292. Text of the full report may also be accessed electronically. For details, call ERS Customer Service (202) 694-5050. END_OF_FILE