Price Surge Drives Texas Rice Production

By Greg Flakus

16 April 2008

A dramatic surge in the international price for rice has U.S. producers planting more fields in an effort to increase profits. But, as Greg Flakus reports from the rice-growing area of Dayton, Texas, high costs could limit their margins.

Rice plants in East Texas

Tractors are tilling the land and building earthen rows that will serve as levees once water flows into these fields. This area of southeast Texas is one of the best rice growing areas of the United States. Other states that also produce major amounts of rice include Arkansas, Louisiana and Mississippi.

Ray Stoesser plants rice on more than 1,800 hectares of land in the area near his home in Dayton, Texas and he is hoping the recent jump in prices will help him come out ahead.

"Naturally, we watch the market and the market is better than it has been since 1974 right now," he said. "We can grow rice and make a good yield and we can usually get a second growth, so we will maximize our profits."

The price of rice has more than doubled in the past year, but Stoesser says production costs have also risen.

"Fertilizer went up $80 a ton last week," he added. "It just seems like when we need it, everything goes up. All our suppliers say they cannot get potash and they cannot get phosphorous and, of course, nitrogen is mostly imported into this country right now, so we have to depend on foreign sources for that."

Dwight Roberts is president and Chief Operating officer of the Houston-based U.S. Rice Producers Association. He says rice is the most expensive crop to grow in the United States because it is fully mechanized, so he says farmers in some of the best growing areas for rice are cautious in their planting decisions.

"The bulk of the U.S. rice crop is yet to be planted as we go north into Louisiana and up into Arkansas to the Missouri boot heel," he noted.

Roberts says the United States exports about half the rice it produces, so when prices are low on the world market, farmers tend to shift production to crops that are more profitable at home, like corn and soybeans. The price of both of those crops has risen sharply in recent years because of their use in making bio-fuels.

Dwight Roberts says the reason for the international shortage of rice has to do, in many cases, with government policies in nations where prices for consumers were subsidized without providing incentives for farmers. He also blames drought in Australia, where rice production has virtually come to a halt, and an increase in demand driven by population growth.

"Economists predict that the world population will grow by one billion people during the next 10 years and the middle class will grow by 1.8 billion people and 600 million of those are in China, and when people move up in the economic chain they want to eat better, they want more protein, which requires more grain and more fuels to produce it," he said.

Growth in population has also contributed to urban sprawl. The loss of arable land to housing, roads and other infrastructure has also reduced the world's rice production.

Dwight Roberts says all of these factors have come together to reduce the amount of rice available.

"We have seen in a number of countries including Vietnam, Thailand, the United States, India, Pakistan and, to some degree, in Uruguay and Argentina, we have seen reductions and so now it is a simple case of supply and demand and we have gotten to a point where world stocks of rice are at the lowest today since the early 1970's and we have had a lot of population growth since then, so there is a very tight supply and Third World consumers in particular are hurting right now," he added.

Increased production in the United States will help alleviate the rice shortage in some parts of the world. The United States has promised to help the Philippines, which imports about 15 percent of the rice consumed in the country and is facing severe shortages. But overall, the demand for this grain worldwide is likely to outpace production, keeping the price high and promoting social unrest in poor nations where food supplies are low.